NEED THE RED BOXES CORRECTED Joe Dumars Company has outstanding 40,000 shares of

Question

NEED THE RED BOXES CORRECTED

Joe Dumars Company has outstanding 40,000 shares of $5 par common stock which had been issued at $30 per share. Joe Dumars then entered into the following transactions. Purchased 5,000 treasury shares at $45 per share. Resold 2,000 of the treasury shares at $49 per share. Resold 500 of the treasury shares at $40 per share. Indicate the effect each of the three transactions has on the financial statement categories listed in the table below, assuming Joe Dumars Company uses t cost method.

Explanation / Answer

2- paid in capital increase as share are issued at premium of 4 per share
retained earning - no effect   no effect on retained earnings

3- paid in capital decrease as treasury shares are issued at discount

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