When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account (s) should be debited?

a. Treasury stock for the par value and paid-in capital in excess of par for the excess of

the purchase price over the par value.

b. Paid-in capital in excess of par for the purchase price.

c. Treasury stock for the purchase price.

d. Treasury stock for the par value and retained earnings for the excess of the purchase

price over the par value.

Question

Business

Princess Winters

8 February, 18:10

When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account (s) should be debited?

a. Treasury stock for the par value and paid-in capital in excess of par for the excess of

the purchase price over the par value.

b. Paid-in capital in excess of par for the purchase price.

c. Treasury stock for the purchase price.

d. Treasury stock for the par value and retained earnings for the excess of the purchase

price over the par value.

+1

Answers (1)

Know the Answer?

Cortez Wagner · Answer 1

c. Treasury stock for the purchase price

Explanation:

At purchase Treasury Stock will be debited by the amount of the purchase

And cash credited by the same amount

Then, when selling this Stock a difference in price betwene the sales price and the purchase price will be adjusted using additional paid-in treasury stock. But this accounts is not used when the purchase is made, neither common stock.