2014 Becker Financial F7

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  • #189434
    Determined CPA
    Participant

    Becker Question –

    Im having a hard time understanding this: This is F7, question 6 on the stockholders equity section

    Q: Asp Co. was organzied on jan 2, yr1, with 30,000 authorized shares of $10 par common stock. During year1, the corp had the following:

    jan 15 – issued 20,000 sh at $15 per share

    july 14 – purchased 5,000 shares at $17 per share

    dec 27 – reissued the 5,000 sh held in treasury at $20 per share

    A:

    $125,000

    Can someone please explain why for the july 14 J/E there is APIC or $25,000 ($5 orig APIC/sh * 5000 sh)

    where does this $5 orig APIC/sh come from??? And why is there RE to this entry?

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  • #613856
    ShelahV
    Member

    If you go to the bottom on F7-10 you'll find the explanation.

    But basically when you use the par method, you put the Teasury stock on the books at par, then if you've issed stock with APIC you reduce a prorated share of the that. This amount comes from the first JE on Jan 5th. The APIC was $5 per share and since you bought back 5,000 sh, you take the $5 per share x 5,000 sh. IF you had APIC – Teasury you would have reduced that to 0 or by the 10,000 remaining, which ever comes first and the remainder then would go to RE. BUT since there is no APIC – Treasury the you use RE For the whole 10,000 to balance your JE.

    BEC 8.14.14 - 87!
    FAR 1.8.15 - 89!
    REG 4.15.15 - 86!
    AUD 7.2.15 - 90!

    Application submitted 8.6.15
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    #613857
    Determined CPA
    Participant

    Got it – thanks.

    Hate financial

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

    #613858
    Anonymous
    Inactive

    Here's my take on July 14 T/S transaction under Par method:

    Dr T/S 50

    Dr APIC – C/S 25

    Dr APIC – RE 10

    Cr Cash 85

    $25k comes from 5,000*(15-10).

    APIC RE is used if T/S goes down to 0 otherwise you stay with APIC-T/S.

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