Question

Coy, Inc. initially issued 200,000 shares of $1 par value stock for $1,000,000 in 2009. In 2010, thecompany repurchased 20,000 shares for $200,000. In 2011, 10,000 of the repurchased shares wereresold for $160,000.

In its balance sheet dated December 31, 2011, Coy, Inc.'s treasury stock account shows a balance of:

A) $200,000
B) $240,000
C) $40,000
D) $160,000

Answer 1

The balance of Coy, Inc.'s treasury stock account at the end of 2011 is $40,000.

Step-by-step explanation:

In order to determine the balance of the treasury stock account, we need to calculate the repurchased shares and the resold shares. In 2010, Coy, Inc. repurchased 20,000 shares for $200,000. This reduces the number of shares outstanding to 200,000 - 20,000 = 180,000. The repurchased shares are recorded as treasury stock, which is a contra-equity account. In 2011, Coy, Inc. resold 10,000 of the repurchased shares for $160,000. This increases the number of shares outstanding to 180,000 + 10,000 = 190,000. The treasury stock account is reduced by the cost of the shares sold, which is $160,000. Therefore, the balance in the treasury stock account is $200,000 - $160,000 = $40,000.