Question

On August 1, 2014, Amherst Company reacquired 4,000 shares of its $15 par value common stock for $18 per share. Amherst uses the cost method to account for treasury stock. What journal entry should Amhurst make to record the acquisition of treasury stock?

Answer 1

Using the cost method means that the stock is recorded at the price it cost to buy it back.

Journal entry is therefore:

Date Account Title Debit Credit

Aug 1, 2014 Treasury Stock $72,000

Cash $72,000

Working:

= 4,000 shares * 18

= $72,000