The correct answer is A. Net income to be overstated.
The excess amount should be recorded in the journal entry to debit cash and credit treasury stock then the paid-in capital from treasury stock.
Let's say that the treasury stock was sold at above cost of $10,000 shares which we know that it is more than what is being paid to purchase, for example lets say it is $7 per share then the debit cash will be $70,000 and the treasury stock credit which is $60,000 which was before the added cost and the paid-in capital which is from treasury stock will be, ($70000 - $60,000) = $ 10,000.
