BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

Chapter
Section
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
1 views

When treasury stock is purchased for cash at more than its par value, what is the effect on total shareholders’ equity under each of the following methods?

Chapter 15, Problem 8MC, When treasury stock is purchased for cash at more than its par value, what is the effect on total

To determine

Identify the effect on total shareholders’ equity under cost method and par value method, when treasury stock purchased for cash at more than its par value.

Explanation

Cost method: Under this method, at the time of reacquiring the treasury stock, it will be debited for the amount paid. At the time of reissuance, treasury stock will be credited and cash will be debited with the proceeds received. Credit the additional paid-in capital for the difference amount.

Par value method: Under this method, at the time of reacquiring the treasury stock, it will be debited with par value reissuance of treasury stock accounted for in a manner similar to that of issue of common stock and preferred stock.

a) Treasury stock is a contra equity account. Purchasing treasury stock at more than its par value will decrease the total shareholders’ equity in both the methods...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Explain the expense recognition principle.

College Accounting, Chapters 1-27

How does the responsibility of HRM change with the size of a firm?

Foundations of Business (MindTap Course List)

PORTFOLIO BETA An individual has 35,000 invested in a stock with a beta of 0.8 and another 40,000 invested in a...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)