Standard Corp.repurchased 1,000 shares of its $1 par value common stock on the market when it was trading for $16 per share.How would the company record this transaction?
A)Debit Treasury Stock for $1,000 and credit Cash for $1,000.
B)Debit Treasury Stock,Common for $1,000 and credit Cash for $1,000.
C)Debit Treasury Stock,$1 Par Value for $16,000 and credit 16 for $16,000.
D)Debit Treasury Stock,Common for $16,000 and credit Cash for $16,000.
E)Debit Retained Earnings for $16,000 and credit Treasury Stock,Common for $16,000.

Question

Quizplus · Accepted Answer

When a company repurchases stock, it is recorded by debiting the Treasury Stock, Common (or preferred) account for the cost of the shares repurchased (in this case, $16,000) and by crediting the Cash account for the same amount ($16,000). Therefore, option D is the correct choice. Options A and B are incorrect because they do not reflect the full cost of the shares repurchased, while options C and E are incorrect because they do not reflect the correct account to be debited.