Question
In: Accounting
Company paid $60,000 to buy back 12,000 shares of its $1 par value ordinary shares.
Company paid $60,000 to buy back 12,000 shares of its $1 par value ordinary shares. These shares were sold later at a selling price of $7 per share. The entry to record the sale includes a
a. credit to Share Premium–Treasury for $24,000.
b. credit to Retained Earnings for $24,000.
c. debit to Share Premium–Treasury for $60,000.
d. debit to Retained Earnings for $60,000.
Solutions
Expert Solution
Cost of treasury shares= $60,000
Number of treasury shares = 12,000
Selling price per treasury share = $7
Cash received from sale of treasury share = Number of treasury shares x Selling price per treasury share
= 12,000 x 7
= $84,000
Amount credited to share premium- treasury = Cash received from sale of treasury share - Cost of treasury shares
= 84,000-60,000
= $24,000
The following entry will be made to record sale of treasury share:
| General Journal | Debit | Credit |
| Cash | 84,000 | |
| Treasury share | 60,000 | |
| Share premium- treasury | 24,000 |
Correct option is a.
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