Refer to the following information for Tolan Corporation: • Common Stock, $1.00 par, 106,000 shares issued, 100,000 shares outstanding
• Paid-In Capital in Excess of Par-Common: $2,190,000
• Retained Earnings: $920,000
• Treasury Stock: 6000 shares purchased at $21 per share
If Tolan resold 2500 shares of treasury stock for $22.50 per share, which of the following statements would be true?

Question

Quizplus · Accepted Answer

The sale of 2500 shares of treasury stock will result in a decrease in the Treasury Stock account. The cost of 2500 shares of treasury stock is (2500 x $21) = $52,500. As the shares were resold for $22.50 per share, the total amount received is (2500 x $22.50) = $56,250. Therefore, the Treasury Stock account will decrease by $52,500 and the remaining $3750 will be recorded as an increase in Paid-In Capital in Excess of Par-Common account ((2500 x ($22.50 - $21)) = $3750). The Retained Earnings account is not affected by the sale of treasury stock.

Refer to the Following Information for Tolan Corporation: • Common