On January 1, Vermont Corporation had 35,300 shares of $12 par value common stock issued and outstanding. All 35,300 shares had been issued in a prior period at $22 per share. On February 1, Vermont purchased 1,140 shares of treasury stock for $25 per share and later sold the treasury shares for $20 per share on March 1.
The journal entry to record the purchase of the treasury shares on February 1 would include a
a.credit to Treasury Stock for $28,500
b.debit to Treasury Stock for $28,500
c.credit to a gain account for $3,420
d.debit to a loss account for $3,420
A corporation has 49,347 shares of $38 par stock outstanding that has a current market value of $350 per share. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately
a.$312.00
b.$87.50
c.$9.50
d.$1,400.00
1. The entry would be
| Cash (1140*20) | 22,800 | |
| Paid in capital in excess of par | 5,700 | |
| Treasury stock (1140*25) | 28,500 |
Option A
2.
Outstanding shares after split = 49,347*4/1 = 197,388
Market value after split = (49,347*38)/197,388 = 9.50
Option C
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