On August 1, 2014, Amherst Company reacquired 4,000 shares of its $15 par value common stock for $18 per share. Amherst uses the cost method to account for treasury stock. What journal entry should Amhurst make to record the acquisition of treasury stock?

Using the cost method means that the stock is recorded at the price it cost to buy it back.

Journal entry is therefore:

Date                     Account Title                                       Debit                 Credit

Aug 1, 2014         Treasury Stock                                $72,000

                            Cash                                                                           $72,000

Working:

= 4,000 shares * 18

= $72,000

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