In 2011, Winn, Inc., issued $1 par value common stock for $35 per share. No other common stock transactions occurred until July 31, 2013, when Winn acquired some of the issued shares for $30 per share and retired them. Which of the following statements correctly states an effect of this acquisition and retirement?
A)2013 net income is decreased.
B)Additional paid-in capital is decreased.
C)2013 net income is increased.
D)Retained earnings is increaseD.The entries to record the stock issuance and subsequent acquisition and retirement (per share) are as follows:

Question

Quizplus · Accepted Answer

When Winn, Inc. retires the shares, the additional paid-in capital is decreased because the shares were originally issued at a price above par value, and the excess over par value is recorded in additional paid-in capital.