On october 1, 2017, adoll company acquired 2,900 shares of its $1 par value stock for $35 per share and held these shares in treasury. on march 1, 2019, adoll resold all the treasury shares for $31 per share. which of the following entries would be recorded when adoll company resells the shares of treasury stock?
a.
cash additional 89,900
paid-in capital common stock 11,600
common stock 101,500
b.
cash 89,900
loss on sale of treasury stock 11,600
treasury stock 101,500
c.
cash 89,900
additional paid-in capital 11,600
treasury stock 101,500
d.
cash 89,900
common stock 2,900
additional paid-in capital 87,000

The answer is c.

Dr Cash Additional 89,900 ;

Dr Paid-in capital Common Stock 11,600

Cr Treasury stock 101,500

Explanation:

We have the Treasury stock account has a Debit balance of 35 x 2,900 = $101,500 post resold. As the resold take place, this account should be cleared to 0. Thus, we credit this account by $101,500;

Cash receipt is 31 x 2,900 = $89,900. Thus, we debit Cash account by the same amount.

The difference 11,600 ( 101,500 - 89,900) will be debited into Paid-in capital common stock account; assuming that after the Debit entry is made, the account still have the Credit balance. Otherwise, the excessive Debit amount that made Paid-in capital account's balance less than 0 Credit will be Debit into Retained Earnings account.

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