Question

Multiple Choice Question 81

Concord Corporation issued 100000 shares of $10 par common stock for $1130000. A year later Concord acquired 15800 shares of its own common stock at $16 per share. Three months later Concord sold 7900 of these shares at $20 per share. If the cost method is used to record treasury stock transactions, to record the sale of the 7900 treasury shares, Concord should credit

Treasury Stock for $126400 and Paid-in Capital in Excess of Par for $31600.

Treasury Stock for $79000 and Paid-in Capital from Treasury Stock for $79000.

Treasury Stock for $158000.

Treasury Stock for $126400 and Paid-in Capital from Treasury Stock for $31600.

Multiple Choice Question 133

On January 3, 2018, Concord Corporation owned a machine that had cost $405000. The accumulated depreciation was $243000, estimated salvage value was $24300, and fair value was $645000. On January 4, 2018, this machine was irreparably damaged by Pharoah and became worthless. In October 2018, a court awarded damages of $481000 against Pharoah in favor of Concord. At December 31, 2018, the final outcome of this case was awaiting appeal and was, therefore, uncertain. However, in the opinion of Concord's attorney, Pharoah’s appeal will be denied. At December 31, 2018, what amount should Concord accrue for this gain contingency?

$402000.

$523500.

$0.

$645000.

Multiple Choice Question 103

Vaughn Manufacturing has $3130000 of short-term debt it expects to retire with proceeds from the sale of 81000 shares of common stock. If the stock is sold for $30 per share subsequent to the balance sheet date, but before the balance sheet is issued, what amount of short-term debt could be excluded from current liabilities?

$2430000

$3130000

$700000

$0

Answer 1

Question 81

Treasury stocks are the company’s own shares which are re-purchased after issuing.

Under cost method, the repurchased shares are recorded at cost as separate line item “Treasury Stock”

Cost of Treasury Stock acquired = 15,800 Shares * $16 per share = $252,800

Sale Value of Treasury Stock share = $20 per share

If the sale price of treasury stock is higher than its cost i.e. purchase price the difference between sale price and purchase price is recoded as Paid in Capital from Treasury Stock.

The journal entry would be

General Journal	Debit	Credit
Cash (Sale Value 7,900 Shares x $20)	$158,000
Treasury Stock (Cost of 7,900 Shares x $16)		$126,400
Paid in Capital from Treasury Stock (Difference or balancing figure)		$31,600

Hence, the correct option is “Concord should credit Treasury Stock for $126400 and Paid-in Capital in Excess of Par for $31600

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

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