Reference no: EM132809220

Problem 1: Which of the following statements about treasury stock is true?

a) Excess of the sales price over cost should be credited to retained earnings.

b) Gains are not recorded on treasury stock transactions but losses are.

c) Losses on treasury stock transactions are recorded in income.

d) Purchasing treasury stock requires a debit to the common stock account.

e) Purchasing treasury stock causes stockholders equity to decrease.

Problem 2: Jagger Company has 100,000 shares of common stock outstanding. On April 15, the board declared a $.40 dividend to be paid to stockholders of record on May 4. The dividend was distributed on May 15. The proper journal entry for Jagger Company on May 15 does includes ____________.

a) both a debit to Dividends Payable for $40,000 and a credit to cash for $40,000

b) none of these

c) a debit to Cash for $40,000

d) a credit to Dividends Payable for $100,000