IBM Issues 200,000 Shares of Stock with a Par Value

question 140

Multiple Choice

IBM issues 200,000 shares of stock with a par value of $0.01 for $150 per share.Three years later,it repurchases these shares for $80 per share.IBM records the repurchase in which of the following ways?

• A)Debit Common Stock for $2,000,debit Additional Paid-in Capital for $29,998,000 and credit Cash for $30 million.
• B)Debit Treasury Stock for $16 million and credit Cash for $16 million.
• C)Debit Common Stock for $2,000,debit Additional Paid-in Capital for $15,998,000 and credit Cash for $16 million.
• D)Debit Stockholders' Equity for $30 million,credit Additional Paid-in Capital for $16 million and credit Cash for $16 million.

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Definitions:

Cash Dividends

Payments made by a corporation to its shareholders from its profits or reserves, usually in the form of cash.

Noncash Investing

Investment activities that do not involve cash transactions, often including the acquisition of physical assets, securities, or other investments through non-cash exchanges.

Treasury Stock

Refers to shares that were once outstanding but have been repurchased by the corporation and are held in its own treasury.

Investing Activities

Transactions involving the acquisition or disposal of long-term assets and other investments, a component of a company's cash flow statement.