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In year 1, Goal Corp. purchases 1,000 shares of treasury stock for $10 per share. In year 2, Goal reissues 500 shares of the treasury stock for $13 per share. In year 3, Goal reissues 200 shares of its treasury stock for $8 per share. The journal entry to record the reissuance of treasury stock in year 3 will include which of the following entries?
(_) Debit paid-in capital—treasury shares $1,500.
(_) Debit paid-in capital—treasury shares $400.
(_) Debit common stock $1,000.
(_) Debit retained earnings $1,600.
Debit paid-in capital—treasury shares $400.

Sagot :

$400 of additional paid-in capital is deducted.

How is Additional Paid-in Capital Calculated?

APIC = (Issue Price – Par Value) x Number of Shares Acquired by Investors is the APIC formula.

Is the additional capital payment a credit or a debit?

This indicates that credits would be recorded for any additions to the common stock, preferred stock, or additional paid in capital accounts. Since the account balances are being reduced, the repurchase of shares from shareholders would result in debits to these accounts.

How do I get rid of extra capital paid?

If it costs you more to buy back the shares of your company than you received when you sold them, you can use the paid-in capital reduction option to buy back the shares. For instance, if you sold 100 shares at $8 each, you got $800 from the transaction.

To learn more about paid-in capital here

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