The Stockholders' Equity Section of Twilight Time's Balance Sheet on January

question 148

Multiple Choice

The Stockholders' Equity section of Twilight Time's balance sheet on January 1,2017,appeared as follows: $\begin{array}{lr}\text { Common stock, } \$ 2 \text { par, 2,000 shares issued and outstanding } & \$ 4,000 \\\text { Additional paid-in capital-common } & 1,600 \\\text { Retained earnings } & 5,400 \\\text { Total stockholders' equity } & \$ 11,000 \\\hline\end{array}$ On March 1,2017,Twilight reacquired 800 shares of common stock at $10 per share.Twilight sold 400 of the treasury shares on November 15 for $12 per share.The entry to record the sale on November 15 would show a(n)

• A)increase in Gain on Sale of Treasury Stock,$800.
• B)increase in Common Stock,$4,800.
• C)decrease in Cash,$4,800.
• D)decrease in Treasury Stock,$4,000.

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Definitions:

Mixed Cost

A cost composed of a mixture of fixed and variable components. Costs are fixed for a set level of production or consumption, becoming variable with further production or consumption.

Fixed Expenses

Regular expenses that do not vary in total over a wide range of activity levels.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted; indicates the contribution towards covering fixed expenses and generating profit.

Net Income

The income a company retains after deducting all costs, taxes, and expenses from its total revenue.