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Llewelyn Company purchased 1,200 shares of its own $5 par value common stock when the market price of the stock was $25 per share. Which of the following journal entries would be used to record the purchase of treasury stock?

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Answer:

The entry to record the purchase of treasury stock will be an increase in treasury stock account and decrease in the cash account by $30000.

market price of the stock= [tex]\$ 25[/tex]

Number of shares= 1200.

∴ [tex]\$25\times 1200= \$ 30000[/tex]

Treasury stock will be recorded at cost.

Journal entry:

Treasury stock  Dr---------------$30000

                    Cash  Cr-----------------$30000

(Purchased treasury stock)

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