JournaldrillReissuing treasury stock above cost
A journal entry exercise from Journaldrill. Solve it with an account picker and debit and credit fields in your browser, and it is checked the moment you submit.
The task
Stonebridge Analytics Inc. holds treasury stock that it bought at $22 per share. It now reissues 1,000 of those shares for $27 per share in cash. Stonebridge uses the cost method.
What this exercise teaches
Treasury Stock is credited at its $22 cost per share, 1,000 x $22 = $22,000. The extra $27,000 - $22,000 = $5,000 is credited to Paid-in Capital from Treasury Stock. A company cannot earn income by trading in its own shares, so no gain is ever recorded on treasury stock transactions.
A hint if you get stuck
Treasury Stock leaves at the price it was bought for. The amount received above that cost is extra paid-in capital, never a gain.
Try it now, free, no account needed
The first 15 tasks on Journaldrill are free. Open it on the practice page, solve it, and get instant feedback with a hint. A free account adds the worked solution; Pro adds timed mode and the certificate.
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