Question

The Tornado Truck Body Company decides to repurchase 10,000 shares of its common stock on January 20. The stock has $1 par value, and the market value per share of common stock on January 20 is $8.75. The company decides to sell 5,000 of the treasury stock shares on April 30 for $9.00 per share. What is the amount of the gain recognized as a result of the transaction

Answer 1

The amount of the gain recognized as a result of the transaction is $35,000.

Step-by-step explanation:

The gain recognized as a result of the transaction is calculated by subtracting the cost of the repurchased shares from the proceeds of the sale of the treasury stock. In this case, the cost of repurchased shares is $1 par value per share multiplied by the number of shares repurchased, which is 10,000. So the cost is $10,000. The proceeds of the sale of the treasury stock is the selling price per share multiplied by the number of shares sold, which is $9.00 per share multiplied by 5,000 shares. So the proceeds are $45,000.

The gain is calculated by subtracting the cost from the proceeds, which is $45,000 - $10,000 = $35,000.

Therefore, the amount of the gain recognized as a result of the transaction is $35,000.

Answer 2

$0

Step-by-step explanation:

The company gets no loss, no gain on sale of its treasury stock.

When a business purchases its own treasury stock, Subway shows treasury stock as the value of the current asset. If the relationship is purchased, then its high-cost loss is adjusted from the capital or retired income.