Llewelyn Company Purchased 1,000 Shares of Its Own $10 Par

question 133

Multiple Choice

Llewelyn Company purchased 1,000 shares of its own $10 par value common stock when the market price of the stock was $36 per share. How would this event affect the company's financial statements?

• A) Increase the treasury stock account and increase the paid-in capital account in excess of par value − common account by $10,000.
• B) Increase the treasury stock account and decrease the cash account by $36,000.
• C) Increase the treasury stock account by $36,000, increase the common stock account by $10,000, and increase the paid-in capital account in excess of par value − common account by $26,000.
• D) Increase the cash account by $36,000, decrease the treasury stock account by $10,000, and increase the paid-in capital account in excess of par − Common account by $26,000.

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Definitions:

Net Income

The profit a company has after all expenses, taxes, and deductions are subtracted from total revenue.

Sales Tax

Sales tax is a tax imposed by governments on sales of goods and services, collected by the retailer at the point of sale.

Installation

Installation involves setting up or putting into place a piece of equipment or system, often requiring technical skills and specific procedures.

Equipment Account

An account in financial statements that represents the cost of equipment purchased by a business, excluding any accumulated depreciation.