[lavendersky]

Becker Question –

Hi everyone!

So this is the book example:

Par Method

10,000 shares @10 par value common stock sold for 15

D:Cash 150000

C:Common stock 100,000

C:APIC 50,000

200 shares repurchased for 20 per share

D:Treasury stock (200 X 10 par) 2,000

D:APIC 1,000

D:Retained Earnings 1,000

C:Cash 4,000

200 shares repurchased for 12 per share

D:Treasury stock (200X 10 par) 2,000

D:APIC 1,000

C:Cash 2400

C:APIC-T/S 600

So I understand every journal entry up to this last one up above^ ” 200 shares repurchased for 12 per share”

Can some please explain why is APIC 1,000????

Shouldn’t the J/E be like this:

D:Treasury stock (200X 10 par) 2,000

D:APIC 400

C:Cash 2400

Since APIC is limit to $5 per share. 2,400-2000 is only 400 left!!! so it didn’t pass the limit. why is it 1,000???

Someone please help me out and what I’m doing wrong! i will go crazy!!! thank you so much!

FAR- PASSED
AUD- PASSED
REG- PASSED
BEC-

You got to do what you have to do!

[johnny_debt]

@lavendersky,

For the par method, you have to track and debit the original amounts that were issued. So for the 2nd repurchase you have to debit the amounts for common @ par, and common @ apic-cs when they were issued. These amounts are $10 par and $5 APIC-CS which at 200 shares is $2000 par and 1000 APIC at issuance.

Cash is $12 x 200 shares repurchased = $2,400. The remaining debit is APIC-Tstock at $600.

All thats really happening is that you're removing the APIC at the value you've issued them for, and reinstating it in APIC-Tstock at the new repurchased value.

AUD - 91
BEC - 84
FAR - 91
REG - 91

[lavendersky]

ahhs. I see! I think I understand it now! thank you!!!!

FAR- PASSED
AUD- PASSED
REG- PASSED
BEC-

You got to do what you have to do!

[Author]

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