Question

Record the following transactions by the cost method.

(a) Bought 500 shares of its common stock at $40 a share.

(b) Sold 100 treasury shares at $50 a share.

(c) Sold 300 shares of treasury stock at $30 a share.

Answer 1

Account Title and explanation	Debit $	Credit $
Treasury stock	20,000
cash		20,000
(Entry to record Bought 500 shares of its common stock at $40 a share)
Cash	5,000
Treasury stock		4,000
Additional paid in capital		1,000
(Entry to record sod 100 treasury shares at $50 a share)
cash	9,000
Additional paid in capital	1,000
Treasury stock		12,000
(Entry to record sod 300 treasury shares at $30 a share)