# Accounting and Finance Problems Essay

2354 Words10 Pages
. In 2003, David Corp. acquired 15,000 shares of its own \$1 par value common stock at \$18 per share. In 2004, David issued 10,000 of these shares at \$25 per share. David uses the cost method to account for its treasury stock transactions. What accounts and what amounts should David credit in 2004 to record the issuance of the 10,000 shares? Additional Treasury Paid-in Retained Common Stock Capital Earnings Stock ———————— —————————— ———————— ——————— a. \$180,000 \$70,000 b. \$180,000 \$ 70,000 c. \$240,000 \$10,000 d. \$170,000 \$70,000 \$10,000 When we buy the stock back, the entire value goes into Cash account and treasury stock account. When the company resells it, the gain goes into APIC (additional paid-in capital) and the stock sold is recorded in the Treasury account. 2. Lynn Co. issued 150,000 shares of \$10 par common stock for \$1,800,000. Lynn acquired 6,000 shares of its own common stock at \$15 per share. Three months later, Lynn sold 3,000 of these shares at \$19 per share. If the cost method is used to record treasury stock transactions, to record the sale of the 3,000 treasury shares, Lynn should credit a. Treasury Stock for \$57,000. b. Treasury Stock for \$30,000 and Paid-in Capital from Treasury Stock for \$27,000. c. Treasury Stock for \$45,000 and Paid-in Capital from Treasury Stock for \$12,000. d. Treasury Stock for \$45,000 and Paid-in Capital in Excess of Par for \$12,000 Following rules outlined in #1, Lynn sold 3,000 of treasury stock, which means 3,000*15 = 45,000 goes into treasury account and excess value (19-15)*3,000 = 12,000 goes