Question

Prior to May 1, Fortune Company has never had any treasury stock transactions. A company repurchased 160 shares of its common stock on May 1 for $8,000. On July 1, it reissued 80 of these shares at $52 per share. On August 1, it reissued the remaining treasury shares at $49 per share. What is the balance in the Paid-in Capital, Treasury Stock account on August 2

Answer 1

Answer: $80

Explanation:

From the question, we are informed that prior to May 1, Fortune Company has never had any treasury stock transactions and that a company repurchased 160 shares of its common stock on May 1 for $8,000. The price per share will be:

= $8,000/160

= $50 per share

The balance in paid capital as at May 1 will be 0.

On July 1, it reissued 80 of these shares at $52 per share. This means that there is an increase of ($52 - $50) = $2 per share.

The balance paid on capital as at July 1 will be:

= $2 × 80

= $160

On August 1, it reissued the remaining treasury shares at $49 per share. This mean that there is a reduction of $1 per share.

The balance paid on capital as at August 1 will be:

= -1 × $80

= -$80

The balance in the Paid-in Capital, Treasury Stock account on August 2 will now be:

= $160 - $80

= $80