B is corrent. When treasury stock is acquired by an entity using the cost method, the treasury stock account is debited for the full acquisition cost.| Treasury stock (6,000 × $18) | 108,000 | | | Cash | | 108,000 |
Note that retained earnings is not affected by this entry. When the shares are later reissued for an amount greater than cost, as in this case, the excess is credited to paid-in capital.| Cash (3,000 × $25) | 75,000 | | | Treasury stock($3,000 × $18) | | 54,000 | | APIC-treasury stock | | 21,000 |
Retained earnings is not affected by this entry, and would never be credited upon reissuance of treasury stock under either the cost or the par value method. Note, however, that had the shares been reissued for an amount less than cost, APIC—treasury stock would be debited for the difference, but only to the extent that a credit balance already exists in the account. If the balance in APIC—treasury stock is not sufficient, retained earnings would be debited to make up any difference.A is incorrect. When treasury stock is acquired by an entity using the cost method, the treasury stock account is debited for the full acquisition cost.| Treasury stock (6,000 × $18) | 108,000 | | | Cash | | 108,000 |
Note that retained earnings is not affected by this entry. When the shares are later reissued for an amount greater than cost, as in this case, the excess is credited to paid-in capital.| Cash (3,000 × $25) | 75,000 | | | Treasury stock($3,000 × $18) | | 54,000 | | APIC-treasury stock | | 21,000 |
Retained earnings is not affected by this entry, and would never be credited upon reissuance of treasury stock under either the cost or the par value method. Note, however, that had the shares been reissued for an amount less than cost, APIC—treasury stock would be debited for the difference, but only to the extent that a credit balance already exists in the account. If the balance in APIC—treasury stock is not sufficient, retained earnings would be debited to make up any difference.C is incorrect. When treasury stock is acquired by an entity using the cost method, the treasury stock account is debited for the full acquisition cost.| Treasury stock (6,000 × $18) | 108,000 | | | Cash | | 108,000 |
Note that retained earnings is not affected by this entry. When the shares are later reissued for an amount greater than cost, as in this case, the excess is credited to paid-in capital.| Cash (3,000 × $25) | 75,000 | | | Treasury stock($3,000 × $18) | | 54,000 | | APIC-treasury stock | | 21,000 |
Retained earnings is not affected by this entry, and would never be credited upon reissuance of treasury stock under either the cost or the par value method. Note, however, that had the shares been reissued for an amount less than cost, APIC—treasury stock would be debited for the difference, but only to the extent that a credit balance already exists in the account. If the balance in APIC—treasury stock is not sufficient, retained earnings would be debited to make up any difference.D is incorrect. When treasury stock is acquired by an entity using the cost method, the treasury stock account is debited for the full acquisition cost.| Treasury stock (6,000 × $18) | 108,000 | | | Cash | | 108,000 |
Note that retained earnings is not affected by this entry. When the shares are later reissued for an amount greater than cost, as in this case, the excess is credited to paid-in capital.| Cash (3,000 × $25) | 75,000 | | | Treasury stock($3,000 × $18) | | 54,000 | | APIC-treasury stock | | 21,000 |
Retained earnings is not affected by this entry, and would never be credited upon reissuance of treasury stock under either the cost or the par value method. Note, however, that had the shares been reissued for an amount less than cost, APIC—treasury stock would be debited for the difference, but only to the extent that a credit balance already exists in the account. If the balance in APIC—treasury stock is not sufficient, retained earnings would be debited to make up any difference. |
