In June 2013, a company repurchased 10,000 shares of stock at a price of $10 per share. In July 2013, the company sold 5,000 of those treasury shares for $12 per share. What is the correct journal entry for the July 2013 sale of the treasury shares?
Cr. Treasury Stock 60,000
Cr. APIC 60,000
Cr. APIC 10,000
Cr. Treasury Stock 50,000
Cr. Treasury Stock 50,000
Cr. Gain on sale 10,000
Cr. Treasury Stock 50,000
The journal entry should be Dr. Cash 60,000 (5,000 x $12); Cr. APIC 10,000 (plug); and Cr. Treasury Stock 50,000 (5,000 x $10). Note that Treasury Stock is credited at its original price ($10) and that APIC is the “gain” on the sale ($60,000 – $50,000). However, companies cannot recognize gains on stock transactions, so we debit APIC instead of gain.
