Question

Lem Co., which accounts for treasury stock under the par value method, acquired 100 shares of its $6 par value common stock for $10 per share. The shares had originally been issued by Lem for $7 per share. By what amount would Lem's additional paid-in capital from common stock decrease as a result of the acquisition?

Answer 1

By $100 Lem's additional paid-in capital from common stock decrease as a result of the acquisition

Step-by-step explanation:

The computation of the decrease in the common stock is shown below:

= (Number of shares × issue price per share) - (Number of shares × par value per share)

= (100 shares × $7) - (100 shares × $6)

= $700 - $600

= $100

As the additional share capital is a difference between the issued price and the par value and the same amount is decreased