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On May 1, 2019 Grant Corp acquired 1,000 shares of its $5 par common stock for...

On May 1, 2019 Grant Corp acquired 1,000 shares of its $5 par common stock for $12/share. On May 1, the stock was trading at a market price of $15/share. If Grant uses the cost method to record treasury stock transactions, the journal entry to the reacquisition of the stock should include

Select one:

Debit to treasury stock for 12,000

Debit to treasury stock for 15,000

Credit to common stock for $5,000

Credit to paid in capital treasury stock for $8,000

Debit to treasury stock for $5,000

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Answer #1

Answer: Debit to treasury stock for 12,000

.

Amount paid to reacquire the stock = 1,000 shares x $12 = $12,000

Cost of treasury stock = $12,000

.

Journal entry to the reacquisition of the stock:

Date Account Title and Explanation Debit Credit
May 1 Treasury stock             [1,000 shares x $12 per share] $12,000
     Cash                   -$12,000
(To record purchase of treasury stock)
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