Franco Company acquired 16,000 shares of its own common stock at
$20 per share on February 5, 2003, and sold 8,000 of these shares
at $27 per share on August 9, 2004. The market value of Franco's
common stock was $24 per share at December 31, 2003, and $25 per
share at December 31, 2004. The cost method is used to record
treasury stock transactions. What account(s) should Franco credit
in 2004 to record the sale of 8,000 shares?
a. Treasury Stock for $192,000 and Retained Earnings for $24,000.
b. Treasury Stock for $216,000.
c. Treasury Stock for $160,000 and Paid-in Capital from Treasury
Stock for $56,000.
d. Treasury Stock for $160,000 and Retained Earnings for $56,000.
The cited solution gives the correct answer but also explains why.