Question

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A company had the following stockholders' equity section on its balance sheet on January 1, 2008:Common...

A company had the following stockholders' equity section on its balance sheet on January 1, 2008:Common stock, $2 par, 10,000 shares issued and outstanding$20,000 Paid-in capital in excess of par-common 40,000 Retained earnings 10,000 Total stockholders' equity $70,000 .

All common shares were originally sold for $6 each. On February 16, the company reacquired 3,000 shares of common stock at $15 per share. 500 of these treasury shares were reissued at $20 on June 1 and 1,500 of these shares were reissued at $12 on June 15. Determine the total stockholders equity after recording these events, if no other transactions impacting the stockholders equity occurred.

a.$53,000

b.$70,000

c.$55,000

d.$66,000

Solutions

Expert Solution

  • All working forms part of the answer
  • Correct Answer = Option ‘A’ $ 53,000
  • The working to find the above ‘total’ of $ 53,000 is provided below:

Beginning balances are given, and transactions’ effects are adjusted to those beginning balance to find the Ending balance.

Beginning balance

Feb 16 Effect

June 1 Effect

June 15 Effect

Ending Balance

Common Stock

$                20,000

$                         -  

$                         -  

$                    -  

$              20,000

Paid in Capital in excess of Par - Common

$                40,000

$                         -  

$                         -  

$                    -  

$              40,000

Paid in Capital - Treasury Stock

$                          -  

$                         -  

$                  2,500

$          (2,500)

$                        -  

Retained Earnings

$                10,000

$                         -  

$                         -  

$          (2,000)

$                 8,000

Total

$                70,000

$                         -  

$                  2,500

$          (4,500)

$              68,000

Less: Treasury Stock

$                          -  

$                45,000

$                (7,500)

$        (22,500)

$              15,000

Total Stockholder's Equity

$                70,000

$             (45,000)

$                10,000

$          18,000

$              53,000 = ANSWER

ekkarill92 answered 1 year ago
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