Question

Fox Co. was organized January 2, with 30,000 authorized shares of $10 par common stock. During the year the corporation had the following capital transactions:
January 5 - Issued 20,000 shares at $15 per share.
July 14 - Purchased 5,000 shares at $17 per share.
December 27 - Reissued the 5,000 shares held in Treasury at $20 per share.

Fox used the cost method to record the purchase and reissuance of the treasury shares. In its December 31 balance sheet, what amount should Fox report in any of it additional paid-in capital accounts?

Answer 1

Answer:

$115,000

Explanation:

January 5 - As the shares are $10 par common stock, the additional paid in capital per share is $(15 - 10) = $5.

Therefore, additional paid-in capital for 20,000 shares × $5 = $100,000

July 14 - There is no additional paid-in capital as there is no issuance of stock.

December 27 - As the shares are purchased at the rate of $17 par treasury stock, the additional paid in capital- treasury stock per share is $(20 - 17) = $3.

Therefore, additional paid-in capital- Treasury stock for 5,000 shares × $3 = $15,000

Total additional paid-in capital accounts = $100,000 + 15,000 = $115,000