B is corrent. When treasury stock is purchased for more than its par value, treasury stock is debited for the purchase price (cost) under the cost method. When the par value method is used, the entry is typically more complex. Treasury stock is debited for its par value. The excess of the purchase price over par may be allocated between additional paid-in capital and retained earnings. The charge to additional paid-in capital should be the sum of (1) total paid-in capital resulting from previous treasury stock transactions of the same issue, and (2) the pro rata portion of other additional paid-in capital relating to the same issue. The rest of the excess is then charged to retained earnings. An acceptable alternative is to charge the entire excess to retained earnings. Conversely, an excess of par over purchase price is credited to additional paid-in capital.
A is incorrect. When treasury stock is purchased for more than its par value, treasury stock is debited for the purchase price (cost) under the cost method. When the par value method is used, the entry is typically more complex. Treasury stock is debited for its par value. The excess of the purchase price over par may be allocated between additional paid-in capital and retained earnings. The charge to additional paid-in capital should be the sum of (1) total paid-in capital resulting from previous treasury stock transactions of the same issue, and (2) the pro rata portion of other additional paid-in capital relating to the same issue. The rest of the excess is then charged to retained earnings. An acceptable alternative is to charge the entire excess to retained earnings. Conversely, an excess of par over purchase price is credited to additional paid-in capital.
C is incorrect. When treasury stock is purchased for more than its par value, treasury stock is debited for the purchase price (cost) under the cost method. When the par value method is used, the entry is typically more complex. Treasury stock is debited for its par value. The excess of the purchase price over par may be allocated between additional paid-in capital and retained earnings. The charge to additional paid-in capital should be the sum of (1) total paid-in capital resulting from previous treasury stock transactions of the same issue, and (2) the pro rata portion of other additional paid-in capital relating to the same issue. The rest of the excess is then charged to retained earnings. An acceptable alternative is to charge the entire excess to retained earnings. Conversely, an excess of par over purchase price is credited to additional paid-in capital.
D is incorrect. When treasury stock is purchased for more than its par value, treasury stock is debited for the purchase price (cost) under the cost method. When the par value method is used, the entry is typically more complex. Treasury stock is debited for its par value. The excess of the purchase price over par may be allocated between additional paid-in capital and retained earnings. The charge to additional paid-in capital should be the sum of (1) total paid-in capital resulting from previous treasury stock transactions of the same issue, and (2) the pro rata portion of other additional paid-in capital relating to the same issue. The rest of the excess is then charged to retained earnings. An acceptable alternative is to charge the entire excess to retained earnings. Conversely, an excess of par over purchase price is credited to additional paid-in capital.
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