Vailes Company reissued 200 shares of its treasury stock. The treasury stock originally cost $25 per share and was reissued for $35 per share. Which of the following accurately reflects how the reissue of the treasury stock would affect Vailes's financial statements?

Question

Quizplus · Accepted Answer

Assets (cash) increase by $7,000 (= 200 × $35), equity (treasury stock) increases by $5,000 (= 200 × $25) and equity (paid-in capital in excess of cost from treasury stock) increases by the difference of $2,000 (= $7,000 − $5,000). The cash inflow is reported as a financing activity.

Vailes Company Reissued 200 Shares of Its Treasury Stock