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.

Answer 1

Answer:

Common stock: $4,400,000

Additional paid-in capital: $20,000,000

Treasury stock: ($4,300,000)

Explanation:

Common stock = (number of shares issued – number of share repurchased) x par value = (2,500,000 – 100,000 – 200,000) * $2 = $4,400,000

Additional paid-in capital is the excess of par-common stock = number of shares issued * (purchased price – par)= 2,500,000 * ($10-$2) = $20,000,000  

Treasury stock = number of share repurchased x (par value -repurchase price) = 100,000*($2-$15) + 200,000*($2-$17) = ($4,300,000)