On January 1, 20xx, Swenson corporation had 40,000 shares of $10 par value common stock issues...

Question:

On January 1, 20xx, Swenson corporation had 40,000 shares of $10 par value common stock issues and outstanding. All 40,000 shares had been issued in a prior period at $20.00 per share. On February 1, 20xx, Swenson purchased 4,000 shares of treasury stock for $24 per share and later sold the treasury shares for $21 per share on March 1, 20xx. The journal entry to record the purchase of the treasury shares on February 1, 20xx would include a:

a) A credit to treasury stock for $96,000

b) A debit to a loss account for $120,000

c) Credit to gain account for $120,000

d) Debit to treasury stock for $96,000

Treasury Stock

Treasury stock can be defined as a reacquired stock that is purchased back from the stockholders of the company. The two methods can determine treasury stock one is cost method, and the other is the par value method.

Answer and Explanation:

The correct option is d. Debit to Treasury stock for $ 96,000

Explanation:

Calculation of treasury stock

{eq}\begin{align*} {\rm{Treasury stock}} &= {\rm{4,000}}\;{\rm{shares}} \times {\rm{\$ }}\;{\rm{24}}\\ &= {\rm{96,000}} \end{align*} {/eq}

The journal entry shows the purchase of treasury stock on February 1, 20XX and purchases are debited so we debit the treasury account by $ 96,000


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