Question

Spartan Industries has the following information available:

 Common Stock -- $0.01 par value ............................................................ $1,000.00

 Additional Paid-in Capital - Common Stock ..................................... $1,736,000.00

 Treasury Stock -- 8,000 shares at a cost of $18.31 ................................. $76,500.00

 Additional Paid-in Capital - Treasury Stock............................................. $3,140.00

 Retained Earnings .............................................................................. $1,986,300.00
At the end of the year, Spartan Industries received $18.47 cash per share by re-issuing 1,750 shares of its common stock to employees. The journal entry to record the re-issuance of the treasury stock would include a:

A) Credit to additional paid-in capital – treasury stock for $280.00.

B) Credit to retained earnings for $280.00

C) Credit to treasury stock for $32,322.50.

D) Debit to additional paid-in capital – treasury stock for $280.00.

E) Debit to treasury stock for $32,042.50.

Answer 1

Solution:
	Answer is A) Credit to additional paid-in capital – treasury stock for $280.00
Working Notes:
	General Journal	Debit	Credit
	Cash A/c	32,322.50
	[$18.47 x 1,750 = 32,322.50 ]
	[ re issuance price is used]
	Treasury Stock		32,042.05
	[$18.31 x 1,750 = 32,042.50]
	[cost price of treasury stock used]
	Additional paid-in capital – treasury stock		280
	[($18.47 - $18.31) x 1,750 = $280 ]
	(issue price - cost price) of treasury stock is used
Notes:	Since, Treasury stock is reissued at price $18.47 higher than it cost price $18.31 hence, the price difference of cost price and reissuance price 0.16 in credited to Additional paid-in capital – treasury stock which will be used in future in case balance of treasury stock is reissued at lower price than cost price or transfer to retained earnings when all the treasury stock would have been reissued.
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