Question

Weldon Wire has issued 2,500,000 shares of $2 par common stock at an average price of $10 per share. Of these, 100,000 shares were repurchased during the year for $15 each and retired. Another 200,000 shares of the shares were repurchased for $17 each and are being held for later use. There were no other common stock transactions during the year. Required: Determine the balance in each of the following shareholders' equity accounts: Common stock-par; Additional paid-in capital; and Treasury stock. (Amounts to be deducted should be indicated by a minus sign.) Common stock-par Additional paid-in capital Treasury stock Total shareholders' equity

Answer 1

Solution

Common stock-Par	$ 5,000,000
Additional paid-in-capital	$ 20,000,000
Treasury stock	$ (4,900,000)
Total stockholder's equity	$ 20,100,000

Treasury stock have a debit balance and they reduce overall stockholder's equity.

	Treasury stock		Total
No of shares	100000	200000	300000
Cost per share	$                15.00	$                17.00
Treasury stock	$ 1,500,000	$ 3,400,000	$ 4,900,000

Treasury stock are presented at cost.