Question

Refer to the following information for Tolan​ Corporation: bullet Common​ Stock, $1.00​ par, 106,000 shares​ issued, 100,000 shares outstanding bullet ​Paid-In Capital in Excess of Parlong dash​Common: ​$2,190,000 bullet Retained​ Earnings: $920,000 bullet Treasury​ Stock: 6,000 shares purchased at​ $21 per share If Tolan resold​ 2,500 shares of treasury stock for​ $22.50 per​ share, which of the following statements would be​ true?

A

The Treasury Stock account would decrease by​ $52,500.

B.

The Retained Earnings account would increase by​ $56,250.

C.The​ Paid-In Capital in Excess of

Parlong dash—Common

account would increase by​ $2,500.

D.

The Treasury Stock account would decrease by​ $26,250.

Answer 1

Answer:

Option (A) is correct.

Explanation:

Journal entry at time of selling treasury stock :

Cash A/c                     Dr.  $56,250

To  Treasury stock                               $52,500    

To  Paid in capital in excess of par     $3,750

Workings:

cash = 2,500 × 22.5

        = $56,250

Treasury stock = 2,500 × $21

                         = $52,500  

Paid in capital in excess of par = 2,500 × $1.5

                                                   = $3,750

Therefore, this will conclude that

Treasury stock will decrease by $52,500.