Question

Vailes Company reissued 200 shares of its treasury stock. The treasury stock originally cost $25 per share and was reissued for $35 per share. Which of the following accurately reflects how the reissue of the treasury stock would affect Vailes's financial statements?

Answer 1

Asset = Liabilities + Equity

7000 = N/A + (Paid in treasury stock)

7000 = N/A + 2000 - (-5000)

Step-by-step explanation:

Cash debit 7000

Paid in the capital - Treasury Stock credit 2000

Treasury Stock credit 5000

Treasury stock is to buy back stock; therefore, it can be sold at a lower price.

Note: Cash balance = $35*200 shares = $7000

Paid in the capital - Treasury Stock = ($35 - $25)*200 shares = $2000

Therefore, treasury stock $(7000 - 2000) = $5000