When Treasury Stock Is Purchased for More Than the Par

question 64

Multiple Choice

When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited?

• A) Treasury stock for the par value and paid-in capital in excess of par for the excess of the purchase price over the par value.
• B) Paid-in capital in excess of par for the purchase price.
• C) Treasury stock for the purchase price.
• D) Treasury stock for the par value and retained earnings for the excess of the purchase price over the par value.

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Definitions:

Administrative Expenses

Costs associated with the general administration of a business, such as salaries of executive officers, legal and professional fees.

Flexible Budget

A budget designed to change in response to variations in volume or activity levels.

Food

A substance consumed by living organisms to provide nutritional support, primarily obtained through plants, animals, or fermentation.

Supplies

Items used in the operation of a business or manufacturing process, which are not directly associated with the products being made.