B is corrent. When treasury stock is acquired by an entity using the cost method, the treasury stock account is debited for the acquisition price (cost).| Treasury stock | (cost) | | | Cash | | (cost) |
Note that the price paid for treasury stock in relation to its par/stated value does not affect the accounting under the cost method as it does under the par value method. When the shares are later resold for an amount greater than cost, the excess increases the Additional paid-in capital account.| Cash | (proceeds) | | | Treasury stock | | (cost) | | APIC-treasury stock | | (excess) |
A is incorrect.When treasury stock is acquired by an entity using the cost method, the treasury stock account is debited for the acquisition price (cost).| Treasury stock | (cost) | | | Cash | | (cost) |
Note that the price paid for treasury stock in relation to its par/stated value does not affect the accounting under the cost method as it does under the par value method. When the shares are later resold for an amount greater than cost, the excess increases the Additional paid-in capital account.| Cash | (proceeds) | | | Treasury stock | | (cost) | | APIC-treasury stock | | (excess) |
C is incorrect.When treasury stock is acquired by an entity using the cost method, the treasury stock account is debited for the acquisition price (cost).| Treasury stock | (cost) | | | Cash | | (cost) |
Note that the price paid for treasury stock in relation to its par/stated value does not affect the accounting under the cost method as it does under the par value method. When the shares are later resold for an amount greater than cost, the excess increases the Additional paid-in capital account.| Cash | (proceeds) | | | Treasury stock | | (cost) | | APIC-treasury stock | | (excess) |
D is incorrect. When treasury stock is acquired by an entity using the cost method, the treasury stock account is debited for the acquisition price (cost).| Treasury stock | (cost) | | | Cash | | (cost) |
Note that the price paid for treasury stock in relation to its par/stated value does not affect the accounting under the cost method as it does under the par value method. When the shares are later resold for an amount greater than cost, the excess increases the Additional paid-in capital account.| Cash | (proceeds) | | | Treasury stock | | (cost) | | APIC-treasury stock | | (excess) |
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