Chapter 13 Part II Quiz

On January 1, 20xx, Swenson Corporation had 40,000 shares of $10 par value common stock issued and outstanding. All 40,000 shares had been issued in a prior period at $20.00 per share. On February 1, 20xx, Swenson purchased 2,000 shares of treasury stock for $24 per share and later sold the treasury shares for $21 per share on March 1, 20xx. The journal entry to record the purchase of the treasury shares on February 1, 20xx, would include a

debit to Treasury Stock for $48,000. 2,000 x 24

The excess of sales price of treasury stock over its cost should be credited to

Paid-In Capital from Sale of Treasury Stock

Treasury stock that had been purchased for $6,400 last month was reissued this month for $8,500. The journal entry to record the reissuance would include a credit to

Paid-In Capital from Treasury Stock for $2,100 8,500 - 6,400

How is treasury stock shown on the balance sheet?

as a decrease in stockholders' equity

On January 1, 20xx, Swenson Corporation had 40,000 shares of $10 par value common stock issued and outstanding. All 40,000 shares had been issued in a prior period at $20.00 per share. On February 1, 20xx, Swenson purchased 3,000 shares of treasury stock for $21 per share and later sold the treasury shares for $24 per share on March 1, 20xx. The journal entry to record the purchase of the treasury shares on February 1, 20xx, would include a

debit to Treasury Stock for $63,000. 3,000 x 21

The paid-in capital from sale of treasury stock account is debited if the sales price of the treasury stock sold is greater than its cost.

False

A sale of treasury stock may result in a decrease in paid-in-capital. All decreases should be charged to the Paid-In-Capital from Sale of Treasury account.

False

If 100 shares of treasury stock were purchased for $50 per share and then sold at $60 per share, $1,000 of income is reported in the income statement.

False

The cost of treasury stock is deducted from total paid-in capital and retained earnings in determining total stockholders' equity.

True

The journal entry to record the purchase of treasury stock will cause total stockholders' equity to decrease by the amount of the cost of the treasury stock.

True

Treasury Stock is listed in the stockholders' equity section on the balance sheet.

True

Treasury stock which was purchased for $3,000 is sold for $3,500. As a result of these two transactions combined

stockholders' equity will be increased by $500 3,500 - 3,000