Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
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If Peartree resold 800 shares of treasury stock for $15 per share, the total equity of the company would remain unchanged.

Question

Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
- 
If Peartree resold 800 shares of treasury stock for $15 per share, the total equity of the company would remain unchanged.

Quizplus · Accepted Answer

The resale of 800 shares of treasury stock at $15 per share would result in a decrease in total equity. The company would receive $12,000 ($15 x 800) from the sale, but would also have to reduce the treasury stock account by $10,000 (800 shares x $20 per share cost). This would result in a net decrease of $2,000 to equity.

Please Refer to the Following Information for Peartree Company