Question 1

Treasury stock is recorded at cost,without reference to par value.

Accepted Answer

Treasury stock is recorded at cost, regardless of its par value.

Question 2

Ross Corporation reported the following: $$\begin{array} { | l | r | } 
\hline \text { Common Stock, } \$ 5 \text { par, } 206,000 \text { shares authorized, } 165,000 \text { shares issued } & \$ 825,000 \
\hline \text { Paid in Capital in Excess of Par - Common } & 214,000 \
\hline \text { Retained Earnings } & 222,000 \
\hline \text { Total Stockholders' Equity } & \$ 1,261,000 \
\hline
\end{array}$$ Which of the following is included in the entry to record the corporation's purchase of 40,000 shares of its common stock for $10.00 per share?

Accepted Answer

Treasury Stock-Common is debited for the cost of the shares purchased, which is $400,000 (40,000 shares x $10.00 per share).

Question 3

Treasury stock ________.

Accepted Answer

Treasury stock is the company's own stock that has been bought back from the shareholders. When the company buys back its own shares, it reduces the number of shares outstanding, which means there are fewer shares available for trading in the market. Therefore, treasury stock decreases the number of shares outstanding.

Question 4

Refer to the following information for Tangent Corporation: • Common Stock,$1.00 par,108,000 shares issued,99,000 shares outstanding
• Paid-In Capital in Excess of Par-Common: $2,330,000
• Retained Earnings: $910,000
• Treasury Stock: 11,000 shares purchased at $33 per share
If Tangent resold 1,300 shares of treasury stock for $23.00 per share,which of the following statements would be true?

Accepted Answer

C)1,300 × $33 = $42,900

Question 5

The account Paid-In Capital from Treasury Stock Transactions has a credit balance of $2,000.The corporation resells 450 shares of its treasury stock.These shares were acquired for $10 per share and sold for $3 per share.The entry to record the sale of treasury stock includes a debit to Retained Earnings of $3,150.

Accepted Answer

The entry to record the sale of treasury stock would include a debit to Treasury Stock for $1,350 (450 shares x $3 per share). Additionally, there would be a credit to Cash for $1,350 (450 shares x $3 per share) and a decrease in the Paid-In Capital from Treasury Stock Transactions account, but not a debit to Retained Earnings.

Question 6

Ropers,Inc.purchases 16,000 shares of its previously issued $2 par value common stock for $460 per share.Which of the following is the correct journal entry to record this transaction?

Accepted Answer

D)16,000 × $460 = $7,360,000

Question 7

Define treasury stock and provide two reasons why a corporation would purchase treasury stock.

Accepted Answer

The answer of Define treasury stock and provide two reasons...

Question 8

A corporation originally issued $13 par value common stock for $15 per share.Which of the following is included in the entry to record the purchase of 300 shares of treasury stock for $11 per share?

Accepted Answer

A)Total amount debited to Treasury Stock-Common = No.of shares × purchase price per share =
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Question 9

A corporation originally issued $8 par value common stock for $10 per share.It purchased the stock for $13 per share.Which of the following is included in the entry to record the sale of 70 shares of treasury stock for $14 per share?

Accepted Answer

B)
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Question 10

The journal entry for the purchase of treasury stock includes a credit to Cash.

Accepted Answer

When a company buys back its own shares (treasury stock), it uses cash to make the purchase. Therefore, the journal entry includes a credit to Cash.

Question 11

Orange Office Supply Corporation completed the following stock issuance transactions:
 $\begin{array}{|l|l|}
\hline\text { Mar. } 28 & \text { Issued 5,000 shares of } \$ 4 \text { stated value common stock for cash of } \
&\$ 20 \text { per share }\
\hline & \text { Received merchandise inventory with a market value of } \$ 46,000 \
 & \text { in exchange for 2,000 shares of the } \$ 4 \text { stated value common } \
\text { May 1 }&\text { Stock. }\
\hline& \text { Issued } 450 \text { shares of } 5 \%, \$ 20 \text { par value preferred stock for } \$ 50 \
\text { May } 14 &\text { per share }\
\hline
\end{array}$ Prepare the journal entries to record these transactions.Explanations are not required.

Accepted Answer

The answer of Orange Office Supply Corporation completed the following...

Question 12

Micro Electronics completed the following stock issuance transactions:
 $$\begin{array} { | l | l | } 
\hline&\text { Issued } 4,000 \text { shares of } \$ 3 \text { par value common stock for cash of }\
 \text { June 7 } & \$ 12 \text { per share } \
\hline \text { Aug. 16 } & \text { Issued 400 shares of no-par preferred stock for } \$ 25,000 \text { cash } \
\hline & \text { Received equipment with a market value of } \$ 75,000 \text { in } \
\text { Sept. 19 } & \text { exchange for 5,000 shares of the } \$ 3 \text { par value common stock } \
\hline
\end{array}$$ Prepare the journal entries to record these transactions.Explanations are not required.

Accepted Answer

The answer of Micro Electronics completed the following stock issuance...

Question 13

Peterson,Inc.issued 4,000 shares of preferred stock for $240,000.The stock has a par value of $60 per share.Prepare the journal entry for this transaction.

Accepted Answer

The answer of Peterson,Inc.issued 4,000 shares of preferred stock for...

Question 14

Rimsone,Inc.purchases 8,500 shares of the company's own $6 par common stock for $8 per share.Journalize the transaction.

Accepted Answer

The answer of Rimsone,Inc.purchases 8,500 shares of the company's own...

Question 15

The purchase of treasury stock ________.

Accepted Answer

The purchase of treasury stock involves buying back the company's own shares of stock. This results in a decrease in assets because cash is used to buy the shares back, and a decrease in stockholders' equity because the number of outstanding shares has been reduced.

Question 16

Assume the following information for Petra Sales,Inc.: • Common Stock,$1.00 par,232,000 shares issued,186,000 shares outstanding
• Paid-In Capital in Excess of Par-Common: $1,770,000
• Retained Earnings: $2,450,000
• Treasury Stock: 26,000 shares purchased at $12 per share
If Petra Sales purchases an additional 13,000 shares of treasury stock at $18 per share,what number of shares will be shown as issued and outstanding?

Accepted Answer

C)Total no.of shares outstanding = 186,000 - 13,000 = 173,000 shares

Question 17

Treasury stock is a contra equity account.

Accepted Answer

Treasury stock is a contra equity account because it is a reduction of the amount of equity that the company has issued and outstanding. It represents the amount of the company's own stock that has been repurchased and is no longer held by shareholders.

Question 18

Treasury stock is ________.

Accepted Answer

Treasury stock is a contra equity account because it reduces the total amount of equity in the company. It represents shares of stock that the company has repurchased and is holding in its own treasury.

Question 19

If treasury stock is resold for more than cost,the difference is debited to the account Paid-In Capital from Treasury Stock Transactions.

Accepted Answer

If treasury stock is resold for more than cost,the difference is credited to the account Paid-In Capital from Treasury Stock Transactions.

Question 20

If treasury shares are sold for less than their cost,the difference is recorded as a loss.

Accepted Answer

If treasury shares are sold for less than their cost,the difference is first debited to Paid-In Capital from Treasury Stock Transactions and then to Retained Earnings if the balance in Paid-In Capital from Treasury Stock Transactions is too small.

Quiz 13: Stockholders Equity