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21 August, 17:00

1. Day Corp. holds 10,000 shares of its $10 par value common stock as treasury stock reacquired in Year 2 for $120,000. On December 12, Year 4, Day reissued all 10,000 shares for $190,000. Under the cost method of accounting for treasury stock, the reissuance resulted in a credit to

2. The changes in account balances of the Vel Corporation during Year 6 are presented below:

Increase

Assets

$356,000

Liabilities

108,000

Capital stock

240,000

Additional paid-in capital

24,000

Vel has no items of other comprehensive income (OCI), and the only charge to retained earnings was for a dividend payment of $52,000. Thus, the net income for Year 6 is

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Answers (1)
  1. 21 August, 17:25
    0
    According to the accounting cost method, the reissuance of the treasury stock would be credited to the additional paid in capital which represents the remaining amount i. e deduct $120,000 from the $190,000

    And, the net income for the year 6 is

    = Increase in assets - Increase in liabilities - Increase in capital stock - Increase in additional paid in capital + Dividend payment

    = $356,000 - $108,000 - $240,000 - $24,000 + $52,000

    = $36,000
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