Please Refer to the Following Information for Peartree Company

question 145

Multiple Choice

Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
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If Peartree resold 1,000 shares of treasury stock for $24 per share, which of the following statements would be TRUE?

• A) The Treasury stock account would go down by $20,000.
• B) The Paid-in capital account would not be affected.
• C) The Treasury stock account would go up by $24,000.
• D) The Paid-in capital account would go down by $4,000.

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Definitions:

Marginal Cost

The cost incurred by producing one more unit of a product, essential for decision-making in production and pricing strategies.

Perfect Competitor

An ideal market condition where numerous small firms compete against each other, and goods are sold at their marginal cost.

Long Run

A period in economic theory where all factors of production and costs are variable, allowing companies to adjust to market conditions fully.

Perfect Competitor

A theoretical market structure where many firms sell an identical product, entry and exit from the market are easy, and no single seller can influence the market price.