B is corrent. The solutions approach is to analyze each transaction to determine its effect on additional paid-in-capital.| 1/5/Y1 | $100,000 | | 7/14/Y1 | (25,000) | | 12/27/Y1 | 50,000 | | 12/31/Y1 APIC | $125,000 |
On 1/5/Y1, 20,000 shares are issued at an amount $5 above par ($15 – $10), resulting in a credit to additional paid-in capital in excess of par of $100,000 (20,000 × $5). On 7/14/Y1, 5,000 treasury shares are purchased at $17 per share. Using the par value method, treasury stock is debited for par value (5,000 × $10 = $50,000) and any excess over par from the original issuance (5,000 × $5 = $25,000) is taken off the books. Any difference between the original issue price ($50,000 + $25,000 = $75,000) and the cash paid to reacquire shares (5,000 × $17 = $85,000) is debited to retained earnings.| Treasury stock | 50,000 | | | APIC in excess of par | 25,000 | | | Retained earnings | 10,000 | | | | 85,000 |
On 12/27/Y1, the 5,000 shares are reissued at an amount $10 above par ($20 - $10), resulting in a credit to additional paid-in capital in excess of par of $50,000 (5,000 × $10).A is incorrect. The solutions approach is to analyze each transaction to determine its effect on additional paid-in-capital.| 1/5/Y1 | $100,000 | | 7/14/Y1 | (25,000) | | 12/27/Y1 | 50,000 | | 12/31/Y1 APIC | $125,000 |
On 1/5/Y1, 20,000 shares are issued at an amount $5 above par ($15 – $10), resulting in a credit to additional paid-in capital in excess of par of $100,000 (20,000 × $5). On 7/14/Y1, 5,000 treasury shares are purchased at $17 per share. Using the par value method, treasury stock is debited for par value (5,000 × $10 = $50,000) and any excess over par from the original issuance (5,000 × $5 = $25,000) is taken off the books. Any difference between the original issue price ($50,000 + $25,000 = $75,000) and the cash paid to reacquire shares (5,000 × $17 = $85,000) is debited to retained earnings.| Treasury stock | 50,000 | | | APIC in excess of par | 25,000 | | | Retained earnings | 10,000 | | | | 85,000 |
On 12/27/Y1, the 5,000 shares are reissued at an amount $10 above par ($20 - $10), resulting in a credit to additional paid-in capital in excess of par of $50,000 (5,000 × $10).C is incorrect. The solutions approach is to analyze each transaction to determine its effect on additional paid-in-capital.| 1/5/Y1 | $100,000 | | 7/14/Y1 | (25,000) | | 12/27/Y1 | 50,000 | | 12/31/Y1 APIC | $125,000 |
On 1/5/Y1, 20,000 shares are issued at an amount $5 above par ($15 – $10), resulting in a credit to additional paid-in capital in excess of par of $100,000 (20,000 × $5). On 7/14/Y1, 5,000 treasury shares are purchased at $17 per share. Using the par value method, treasury stock is debited for par value (5,000 × $10 = $50,000) and any excess over par from the original issuance (5,000 × $5 = $25,000) is taken off the books. Any difference between the original issue price ($50,000 + $25,000 = $75,000) and the cash paid to reacquire shares (5,000 × $17 = $85,000) is debited to retained earnings.| Treasury stock | 50,000 | | | APIC in excess of par | 25,000 | | | Retained earnings | 10,000 | | | | 85,000 |
On 12/27/Y1, the 5,000 shares are reissued at an amount $10 above par ($20 - $10), resulting in a credit to additional paid-in capital in excess of par of $50,000 (5,000 × $10).D is incorrect. The solutions approach is to analyze each transaction to determine its effect on additional paid-in-capital.| 1/5/Y1 | $100,000 | | 7/14/Y1 | (25,000) | | 12/27/Y1 | 50,000 | | 12/31/Y1 APIC | $125,000 |
On 1/5/Y1, 20,000 shares are issued at an amount $5 above par ($15 – $10), resulting in a credit to additional paid-in capital in excess of par of $100,000 (20,000 × $5). On 7/14/Y1, 5,000 treasury shares are purchased at $17 per share. Using the par value method, treasury stock is debited for par value (5,000 × $10 = $50,000) and any excess over par from the original issuance (5,000 × $5 = $25,000) is taken off the books. Any difference between the original issue price ($50,000 + $25,000 = $75,000) and the cash paid to reacquire shares (5,000 × $17 = $85,000) is debited to retained earnings.| Treasury stock | 50,000 | | | APIC in excess of par | 25,000 | | | Retained earnings | 10,000 | | | | 85,000 |
On 12/27/Y1, the 5,000 shares are reissued at an amount $10 above par ($20 - $10), resulting in a credit to additional paid-in capital in excess of par of $50,000 (5,000 × $10). |
