Question

Voiles Company reissued 200 shares of its treasury stock. The treasury stock originally cost $25 per share and was reissued for $35 per share. Select the answer that accurately reflects how the reissue of the treasury stock would affect the elements of Voiles’ financial statements. Assets = Liab. + Stk. Equity Rev. − Exp. = Net Inc Stmt. of Cash Flows Pd-in Cap TS − Treas. Stk. A. 7,000 = NA + 2,000 − (5,000) NA − NA = NA 7.000 FA B. 7,000 = NA + 2,000 − 5,000 NA − NA = NA 7,000 FA C. 7,000 = NA + 7,000 − NA NA − NA = NA 7,000 FA D. 5,000 = NA + 5,000 − NA NA − NA = NA 5,000 FA

Answer 1

Answer:

The correct option is A,A. 7,000 = NA + 2,000 - (5,000) NA - NA = NA 7.000 FA

Explanation:

By issuing the treasury stock ,asset,cash to be precise increases by $7000($35*200) which implies a debit to the asset ,hence the $7000 seen on the left hand-side of the equation.

This transaction has no liability impact,as a result liabilities is denoted NA,not applicable.

The par value of the treasury is to be credited to treasury stock with $5,000($25*200).

Lastly the difference between the par value and the issue is credited to paid-in capital from treasury stock i.e($35-$25)*200))=$2000,this is depicted by $2000 in the equation