Question

During Year 1, Long Beach Corporation completed the treasury stock transactions described below: Jan. 2 Reacquired 1,000 shares at $10 per share Feb. 2 Sold 400 shares at $12 per share Prepare the appropriate journal entry to record the sale of the treasury stock on February 2. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Cash A/c Dr. 400
`*` $12 = $4,800

To Treasury Stock A/c 400
`*` $10 = $4,000

To Additional Paid In Capital 400
`*` $2 = $800

(Sale of treasury stock, on premium of $2)

Step-by-step explanation:

When originally the treasury stock was purchased then the entry would be:

Treasury Stock A/c Dr. 1,000
`*` $10

Cash A/c $10,000

Recording purchase of treasury stock.

Now when the stock is sold for $12 each, then the amount of $2 = $12 - $10 = Additional Paid in Capital.

Therefore entry will be:

Cash A/c Dr. 400
`*` $12 = $4,800

To Treasury Stock A/c 400
`*` $10 = $4,000

To Additional Paid In Capital 400
`*` $2 = $800

Sale of treasury stock, on premium of $2