Question 1

On January 1, Year 1, a company had 10,000 shares of $10 par common stock outstanding (originally issued at $15). On March 1, it reacquired 1,000 shares at $20 per share. The company uses the Cost Method for treasury stock. On July 1, it reissued 500 of these shares at $25 per share.
What is the credit to Additional Paid-in Capital (APIC) - Treasury Stock on July 1?

Accepted Answer

Cost Method:
Buyback: Debit TS @ Cost ($20).
Reissue: Credit TS @ Cost ($20).
Difference goes to APIC-TS (if gain) or APIC-TS/RE (if loss).
Here: Sold at $25, Cost $20. Credit APIC-TS $5 * 500.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Using the Par Value method logic (comparing to original issue price).

How to approach this question

Full Answer

Common mistakes

Practice the full CPA FAR Practice Exam 3

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