CityScape Company repurchased 10,000 shares of its own $5 par value common stock for $10 per share. The company later reissued 5,000 shares for $15 per share. These transactions resulted in a:

Question

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The repurchase of the 10,000 shares decreases the total number of shares outstanding and increases the treasury stock account by $100,000 (10,000 shares x $10 per share). When the company reissues 5,000 shares at $15 per share, it receives $75,000 ($15 per share x 5,000 shares). The transaction results in a net increase in paid-in capital of $25,000 ($75,000 received - $50,000 cost of treasury stock). Therefore, the correct answer is B - $25,000 increase in paid-in capital.

CityScape Company Repurchased 10,000 Shares of Its Own $5 Par