Question

1. Day Corp. holds 10,000 shares of its $10 par value common stock as treasury stock reacquired in Year 2 for $120,000. On December 12, Year 4, Day reissued all 10,000 shares for $190,000. Under the cost method of accounting for treasury stock, the reissuance resulted in a credit to

2. The changes in account balances of the Vel Corporation during Year 6 are presented below:

	Increase
Assets	$356,000
Liabilities	108,000
Capital stock	240,000
Additional paid-in capital	24,000

Vel has no items of other comprehensive income (OCI), and the only charge to retained earnings was for a dividend payment of $52,000. Thus, the net income for Year 6 is

Answer 1

Solution 1:

Under the cost method of accounting for treasury stock, the reissuance resulted in a credit to "Additional paid in capital for $70,000"

solution 2:

Net income for the year = Increase in assets - Increase in liabilities - Increase in capital stock - Increase in additional paid in capital + Dividend payment

= $356,000 - $108,000 - $240,000 - $24,000 + $52,000

= $36,000