Question

1. If treasury stock is resold at price higher than purchase price of Treasury stock, and company has no balance in CIEP repurchase from treasury stock, then it credits the difference to
   1. Common stock
   2. Capital in excess of repurchase
   3. Treasury stock
   4. Retained earnings
2. 1. Holders of which stock are entitled to receive all current and past dividends.
      1. Common stock
      2. Preferred stock
      3. Cumulative preferred stock
      4. Convertible preferred stock

Answer 1

Answer:1. Capital in excess of repurchase (option b)

When treasury stock is resold at a price higher than what it was purchased for, the cash account is debited with the total amount received, Treasury stock account is credited with the cost of treasury stock and the difference goes to Paid-in capital in excess of par. Hence, option b is correct.

Neither common stock, nor retained earnings are credited, hence, option a and d are incorrect.

Treasury stock is credited with the cost of the stock and not the difference. Thus, option c is also incorrect.

Ans. 2: Cumulative preferred stock (option c)

When the dividends are not paid for any past years, the holders of cumulative preferred stock are entitled to receive all the pending past dividends along with the current year's dividends. Hence, option c is correct.

Holders of common stock,Preferred stock and convertible preferred stock are not entitled to receive any pennding dividend payments. Hence, all other options are incorrect.