On May 3, Zirbal Corporation purchased 7,000 shares of its own stock for $49,000 cash. On November 4, Zirbal reissued 1,050 shares of this treasury stock for $8,400. Prepare the May 3 and November 4 journal entries to record Zirbal’s purchase and reissuance of treasury stock.

Answer and Explanation:

The Journal entries are shown below:-

1. Treasury Stock-at cost Dr, $49,000

         To Cash $49,000

(Being treasury stock is recorded)

Here we debited the treasury stock-at cost as it is purchased and we credited the cash as it decrease the assets

2. Cash Dr, $8,400

       To Treasury Stock - at cost $7,350

        To Paid in capital -Treasury stock $1,050  ($8,400 - $7 × 1,050)

(Being reissue of treasury stock is recorded)

Here we debited the cash as it increase the assets and we credited the Treasury Stock - at cost and  Paid in capital -Treasury stock as the re-issuance of the treasury stock is done.

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