Moony Corporation Had 20,000 Shares of $4 Par-Value Common Stock

question 6

Multiple Choice

Moony Corporation had 20,000 shares of $4 par-value common stock outstanding on January 1, 2012. On January 10, 2012, the firm purchased 2,000 of its outstanding shares for $18 per share. On July 22, 2012, it reissued 1,000 shares at $22 per share. Given this information, the entry to record the purchase of this stock on January 10 would include a debit to

• A) Treasury Stock of $36,000
• B) Common Stock of $36,000
• C) Treasury Stock of $8,000
• D) Common Stock of $8,000

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Definitions:

Investment in Bonds

Financial investments made by purchasing debt securities issued by corporations or governments, aiming to earn interest income.

Equity Method

An accounting technique used for recording investments in which the investor has significant influence over the investee but does not exercise full control.

Significant Influence

This term refers to the power to participate in the financial and/or operating policy decisions of another entity, but not control those policies. It is often quantified by owning 20% to 50% of the voting shares of the investee company.

Investee

The company whose stock is purchased by the investor.