One Love Corporation originally issued 50,000 shares of $10 par value common stock at $15 per share. During the current year, One Love Corporation issued 4,000 shares of its common stock at $14 per share, reacquired 3,500 shares of its common stock for $18 per share, and reissued 2,500 shares of treasury stock at $14 per share. The balance in Additional Paid-in Capital-Common stock on December 31 is:

Question

Quizplus · Accepted Answer

The initial issuance of 50,000 shares at $15 per share resulted in $250,000 of common stock and $250,000 of additional paid-in capital.

The issuance of 4,000 shares at $14 per share resulted in $56,000 of common stock and $4,000 of additional paid-in capital.

The reacquisition of 3,500 shares at $18 per share reduced common stock by $63,000 and retained earnings by $17,500 (the excess of the reacquisition price over the par value of the common stock).

The reissuance of 2,500 shares of treasury stock at $14 per share resulted in $35,000 of common stock and $7,500 of additional paid-in capital (the excess of the reissuance price over the reacquisition price).

Thus, the balance in Additional Paid-in Capital-Common Stock on December 31 is $250,000 + $4,000 + $7,500 = $261,500.

However, since the question is asking for the balance in Additional Paid-in Capital-Common Stock, the $17,500 reduction in retained earnings due to the reacquisition of stock should be added back.

Therefore, the balance in Additional Paid-in Capital-Common Stock on December 31 is $261,500 + $17,500 = $279,000.

None of the answer choices match this amount exactly, but the closest is $266,000, which is only $13,000 off.

One Love Corporation Originally Issued 50,000 Shares of $10 Par