Question

Coy, Inc. initially issued 200,000 shares of $1 par stock for $1,000,000 in 2016. In 2017, the company repurchased 20,000 shares for $200,000. In 2018, 10,000 of the repurchased shares were resold for $160,000. In its balance sheet dated December 31, 2018, Coy, Inc.'s treasury stock account shows a balance of: Multiple Choice $200,000. $40,000. $100,000. $0.

Answer 1

Answer:

$100,000

Explanation:

The issue of original shares are at premium of $4 per share.

As $1 + $4 = $5 $\times$ 200,000 = $1,000,000

When 20,000 shares were repurchased, there price would be $200,000/20,000 = $10 per share.

Now from this 10,000 shares are sold for $160,000, at a price of $160,000/10,000 = $16 per share

Balance in treasury account will be $200,000 - $10,000 $\times$ $10 = $100,000

The extra amount received of $6 = $16 - $10 is paid in capital and shall not reduce the balance of treasury account.