B is corrent. Under the par value method of accounting for treasury stock, the following journal entry should be made when treasury stock is acquired for cash at a price in excess of its original issue price:| Treasury stock | (par value) | | | APIC—common stock | (balance of issue price) | | | Retained earnings | (plug) | | | | (acquisition price) |
This transaction decreases total stockholders’ equity. When the treasury stock is subsequently reissued, the following journal entry should be made:| Cash | (reissue price) | | | | (par value) | | | (plug) |
This transaction increases total stockholders’ equity.A is incorrect. Under the par value method of accounting for treasury stock, the following journal entry should be made when treasury stock is acquired for cash at a price in excess of its original issue price:| Treasury stock | (par value) | | | APIC—common stock | (balance of issue price) | | | Retained earnings | (plug) | | | | (acquisition price) |
This transaction decreases total stockholders’ equity. When the treasury stock is subsequently reissued, the following journal entry should be made:| Cash | (reissue price) | | | | (par value) | | | (plug) |
This transaction increases total stockholders’ equity.C is incorrect. Under the par value method of accounting for treasury stock, the following journal entry should be made when treasury stock is acquired for cash at a price in excess of its original issue price:| Treasury stock | (par value) | | | APIC—common stock | (balance of issue price) | | | Retained earnings | (plug) | | | | (acquisition price) |
This transaction decreases total stockholders’ equity. When the treasury stock is subsequently reissued, the following journal entry should be made:| Cash | (reissue price) | | | | (par value) | | | (plug) |
This transaction increases total stockholders’ equity.D is incorrect. Under the par value method of accounting for treasury stock, the following journal entry should be made when treasury stock is acquired for cash at a price in excess of its original issue price:| Treasury stock | (par value) | | | APIC—common stock | (balance of issue price) | | | Retained earnings | (plug) | | | | (acquisition price) |
This transaction decreases total stockholders’ equity. When the treasury stock is subsequently reissued, the following journal entry should be made:| Cash | (reissue price) | | | | (par value) | | | (plug) |
This transaction increases total stockholders’ equity. |
