Question:
Jenkins Firm was organized on January 1, 2005, with authorized capital of 500,000 shares of $10 par value common stock. During 2005, Jenkins issued 20,000 shares at $12 per share, purchased 2,000 shares of treasury stock at $13 per share, and sold 2,000 shares of treasury stock at $14 per share. What is the amount of additional paid-in capital at December 31, 2005?
Answer:
20,000 shares sold at 12$ per share with par value 10$ would create 2$ per share in APIC.
20,000 x 2$ = 40,000 in APIC
treasury shares purchased does not do anything to APIC under the gross method, which I assume the question is using.
However, they are sold for 1$ more than the amount they were acquired for. This adds to APIC.
2,000 x 1$ = 2,000$ to APIC from treasury shares.
APIC at y/o Dec 31, 05 is
40,000 + 2,000 = 42,000$
PS.. you gotta read your book man if u want to learn this stuff
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