[Frances]

Question about using the par method for treasury stock. My understanding was that for reacquisition of stock that APIC-CS was reversed for the same amount per share that was used when the shares were originally issued.

For the transactions below:
Par = 1,000
Original Issue = 1,200
Reacquisition = 1,100

NINJA Answer:
Reacquisition using par value method:
Dr. Cr.
Treasury shares $1,000
Additional paid-in capital 100
Cash $1,100

Why is the par method reacquisition entry not done like this:

DR: Treasury Stock 1,000
DR: APIC-CS 200
CR: APIC-TS 100
CR: Cash 1,100

AUD - NINJA in Training
BEC - NINJA in Training
FAR - NINJA in Training
REG - NINJA in Training

Waiting for NASBA to process my application.

[iwantthiscpa]

FAR: 67, 69, 74, 81
AUD: 72, 74, 78
REG: 77
BEC: 70, 77

[iwantthiscpa]

With Par Value method, you only use APIC T/S if there's a difference leftover after you've debited Treasury Stock for the # of shares reacquired multiplied by the par value AND debited APIC C/S for the # of shares reacquired multiplied by the value used for the original APIC C/S entry.

In this problem, the reacquisition ($1100) is less than the original issuance ($1200) so you won't need to include APIC T/S in the entry. If the reaqcuisition was more than the original issuance, then you'd need to add APIC T/S in the entry for the difference.

FAR: 67, 69, 74, 81
AUD: 72, 74, 78
REG: 77
BEC: 70, 77

[Frances]

Thank you for looking at this.

It seems like there would be a difference leftover if APIC-CS is not treated as a plug, but instead is reversed for the exact amount of excess per share that went in at original issue.

Original APIC-CS = 200
Wouldn't you need to back out that original 200 and make up the difference with APIC-TS?

DR: Treasury Stock 1,000
DR: APIC-CS 200
CR: APIC-TS 100
CR: Cash 1,100

AUD - NINJA in Training
BEC - NINJA in Training
FAR - NINJA in Training
REG - NINJA in Training

Waiting for NASBA to process my application.

[iwantthiscpa]

Now that I'm looking over your question, I get why it's confusing. You're right when you said “APIC-CS was reversed for the same amount **per share** that was used when the shares were originally issued”, but in this problem we don't know the # of shares we are repurchasing, nor do we know the par value. Was that given in the problem at all?

FAR: 67, 69, 74, 81
AUD: 72, 74, 78
REG: 77
BEC: 70, 77

[Frances]

The problem is lost in the sea of MCQs I have done, but I think I understand the process better now that we can talked about it. Thank you so much for working with me on this!

AUD - NINJA in Training
BEC - NINJA in Training
FAR - NINJA in Training
REG - NINJA in Training

Waiting for NASBA to process my application.

[Adam]

You will never EVER use this..dont bother learning it..spend time on other areas..nobody in the real world uses this method, as well as at most you might see one test question..if that..

[Author]

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