Question

The corporate charter of Llama Co. authorized the issuance of 12 million, $1 par common shares. During 2021, its first year of operations, Llama had the following transactions: January 1 sold 10 million shares at $17 per share June 3 purchased 4 million shares of treasury stock at $20 per share December 28 sold the 4 million shares of treasury stock at $22 per share What amount should Llama report as additional paid-in capital in its December 31, 2021, balance sheet

Answer 1

Answer:

$168 million

Explanation:

Additional Paid-in-Capital is the amount of capital received on the issuance of stock over its par value. Additional paid-in-capital is normally received against the issuance of common shares, preferred share and treasury share.

In this question Company made the following transaction.

January 1, 2021

As we Know Par value of the share is $1 any amount excess of this value will be added in additional paid-in-capital account.

Additional Paid-in-Capital = 10 million x ( $17 - $1 ) = $160 million

December 28, 2021

Additional Paid-in-Capital = 4 million x ($22-$20) = $8 million

Total Additional Paid-in-Capital = $160 million + $8  million = $168 million