An analysis of stockholders\' equity of Hahn Corporation as of January 1, 2010,

Question

An analysis of stockholders' equity of Hahn Corporation as of January 1, 2010, is as follows:

Common stock, par value $20; authorized 100,000 shares;

issued and outstanding 90,000 shares $1,800,000
Paid-in capital in excess of par 900,000
Retained earnings 760,000

Total $3,460,000

Hahn uses the cost method of accounting for treasury stock and during 2010 entered into the following transactions:
Acquired 2,500 shares of its stock for $75,000.
Sold 2,000 treasury shares at $35 per share.
Sold the remaining treasury shares at $20 per share.


Assuming no other equity transactions occurred during 2010, what should Hahn report at December 31, 2010, as total additional paid-in capital?

a. $895,000
b. $900,000
c. $905,000
d. $915,000

Explanation / Answer

1. Tresury Stock (2500sh * $30) 75,000 Cash 75,000 $75,000/$30/sh=2500sh 2. Cash(2000*$35) 70,000 Treasury Stock 60,000 Paid in Cap -tresury stock 10,000 3. Cash (500*$20/sh) 10,000 Paid in Cap-Treasury stock 5,000 Tresury Stock 15,000 Paid in Cap-tresury stock= 10,000-5000=5000 Additioanal Paid in Cap=Paid in Cap in Exc of par + Paid in Cap -tresury stock= =900,000+5,000= 905,000 c.

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