Please refer to the following information for Peartree Company: Common stock, $1

Q: Please refer to the following information for Peartree Company: Common stock, $1

The correct answer is D): Cost method: Under Cost method, the journal entry would be as follows. Date Account title & Explanation Debit Credit Cash ($15*800) $ 12,000 Retained earnings ($16,000- $4,000) $ 4,000 Treasury stock ($20*800 $ 16,000 Date Account title & Explanation Debit Credit Cash ($15*800) $ 12,000 Retained earnings ($16,000- $4,000) $ 4,000 Treasury stock ($20*800 $ 16,000

ID: 2461170 • Letter: P

Question

Please refer to the following information for Peartree Company: Common stock, $1.00 par, 100,000 issued, 95,000 outstanding Paid-in capital in excess of par: $2,150,000 Retained earnings: $910,000 Treasury stock: 5,000 shares purchased at $20 per share (Assume there are no balances in Paid-in capital from treasury stock transactions.) If Peartree resold 800 shares of treasury stock for $ 15 per share, what journal entry would be required? Debit Treasury stock $16,000. debit Loss on sale $4,000 and credit Cash $20,000. Debit Treasury stock $12,000 and credit Cash $12,000. Debit Cash $12,000 and credit Treasury stock $12,000. Debit Cash $12,000, debit Retained earnings $4,000 and credit Treasury stock $16,000.

Explanation / Answer

The correct answer is D):

Cost method:

Under Cost method, the journal entry would be as follows.

Date

Account title & Explanation

Debit

Credit

Cash ($15*800)

$ 12,000

Retained earnings ($16,000- $4,000)

$ 4,000

Treasury stock ($20*800

$ 16,000