Please Refer to the Following Information for Peartree Company

question 128

Multiple Choice

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
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If Peartree purchases an additional 1,000 shares of treasury stock at $18 per share, what journal entry will be required?

• A) Debit Treasury stock $18,000 and credit Retained earnings $18,000.
• B) Debit Treasury stock $20,000, credit Loss on sale $2,000 and credit Cash $18,000.
• C) Debit Treasury stock $18,000 and credit Cash $18,000.
• D) Debit Cash $18,000 and credit Treasury stock $18,000.

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Definitions:

Constant Dividend

A dividend policy in which a company commits to distributing a fixed amount of money to shareholders regularly.

Rate of Return

The upward or downward adjustment in the value of an investment during a particular period, characterized as a percentage of the initial investment price.

Annual Dividends

Payments made by a corporation to its shareholder members from its profits or reserves on a yearly basis.

Special Dividend

A one-time payment made by a company to its shareholders, usually in the form of cash, stocks or property, outside the regular dividend payments.