Question

A company resells 400 shares of its own common stock for $20 per share. The company has acquired these shares two months before for $15 per share. The resale of this stock would be recorded with a:_______.
A) Debit to Common Stock for $8,000
B) Credit to Treasury Stock for $8,000
C) Credit to Additional Paid-In Capital for $2,000
D) Debit to Additional Paid-In Capital for $2,000

Answer 1

Answer:

C. Credit to additional paid-in capital for $2,000

Explanation:

Based on the information given we were told that 400 shares of own common stock was resell for $20 per share in which the shares was acquired two months before for $15 per share which means that the resale of this stock would be recorded with a: Credit to additional paid-in capital for $2,000

Calculated as:

Additional paid-in capital=(400 shares*$20 per share)-(400 shares*$15 per share)

Additional paid-in capital=$8,000-$6,000

Additional paid-in capital=$2,000