A company repurchases its own shares from the market. The shares of the company

Question

A company repurchases its own shares from the market. The shares of the company were trading at $40/share, and the company repurchased 1,000 shares with cash. A few months later the company sold 400 of those repurchased shares for $45/share. What is the journal entry for selling the 400 shares?

A) Dr. Cash 18,000 Cr. Treasury Stock, Common 16,000 Cr. Paid-In Capital, Treasury 2,000

B) Dr. Cash 18,000 Cr. Treasury Stock, Common 16,000 Cr. Retained Earnings 2,000

C) Dr. Cash 45,000 Cr. Treasury Stock, Common 40,000 Cr. Paid-In Capital, Treasury 5,000

D) Dr. Cash 45,000 Cr. Treasury Stock, Common 40,000 Cr. Investment Gain 5,000

Explanation / Answer

A) Dr. Cash 18,000 Cr. Treasury Stock, Common 16,000 Cr. Paid-In Capital, Treasury 2,000

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