Lem Co., which accounts for treasury stock under the par value method, acquired 100 shares of its $6 par value common stock for $10 per share. The shares had originally been issued by Lem for $7 per share. By what amount would Lem's additional paid-in capital from common stock decrease as a result of the acquisition?

Question

Remington Jordan

Business

17 May, 05:27

Lem Co., which accounts for treasury stock under the par value method, acquired 100 shares of its $6 par value common stock for $10 per share. The shares had originally been issued by Lem for $7 per share. By what amount would Lem's additional paid-in capital from common stock decrease as a result of the acquisition?

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Belinda Sellers · Answer 1

By $100 Lem's additional paid-in capital from common stock decrease as a result of the acquisition

Explanation:

The computation of the decrease in the common stock is shown below:

= (Number of shares * issue price per share) - (Number of shares * par value per share)

= (100 shares * $7) - (100 shares * $6)

= $700 - $600

= $100

As the additional share capital is a difference between the issued price and the par value and the same amount is decreased