Waltham Corporation was organized on January 2 with 100,000 authorized shares of $10 par value common stock.During the year,Waltham had the following capital transactions:
•January 5 -- issued 75,000 shares at $14 per share
•December 27 -- purchased 5,000 shares at $11 per share
Waltham used the par value method to record the purchase of the treasury shares.
What would be the balance in the paid-in capital from treasury stock account at December 31?

Question

Quizplus · Accepted Answer

The balance in the paid-in capital from treasury stock account at December 31 can be calculated using the following formula:

Paid-in capital from treasury stock = (Purchase price per share - Par value per share) x Number of treasury shares

Purchase price per share = $11
Par value per share = $10
Number of treasury shares = 5,000

Paid-in capital from treasury stock = ($11 - $10) x 5,000 = $5,000

Therefore, the balance in the paid-in capital from treasury stock account at December 31 would be $15,000 ($20,000 at the beginning of the year - $5,000 for the purchase of treasury stock during the year). The correct answer is C.

Waltham Corporation Was Organized on January 2 with 100,000 Authorized