Question

# 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

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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