Use the Following Information to Answer the Question Below $\$ 20$

question 41

Multiple Choice

Use the following information to answer the question below. The following transactions involving Lupine Corporation occurred during the year:
Apr. 1 Purchased 2,000 shares of its own preferred stock for $\$ 20$ , the current market price. This is the first transaction involving its own stock engaged in by the company.

May 3 Sold 400 of the shares purchased on April 1 for $25 per share.
June 5 Retired 600 of the shares purchased on April 1. The original issue price was $\$ 10$ . The par value of the stock is $\$ 5$ .

The entry to record the May 3 transaction would be:

• A)
• \(\begin{array}{llr}
• \text {Treasury Stock, Preferred } &10,000\\
• \text { Cash } &&10,000\\
• \end{array}\)
• B)
• \(\begin{array}{l}
• \text { Cash }&10,000\\
• \text { Treasury Stock, Preferred } & & 8,000 \\
• \text { Paid-in Capital, Treasury Stock } & 2,000 &
• \end{array}\)
• C)
• \(\begin{array} { l r r }
• \text { Cash } & 4,000 & \\
• \text { Retained Earnings } & 6,000 & \\
• \text { Treasury Stock, Preferred } & & 10,000
• \end{array}\)
• D)
• \(\begin{array}{llr}
• \text {Treasury Stock, Preferred } &8,000\\
• \text { Cash } &&8,000\\
• \end{array}\)

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Definitions:

Futures Option

An option contract that gives the holder the right, but not the obligation, to buy or sell a futures contract at a specified price on or before a certain date.

Forward Contract

A contractual arrangement to purchase or sell a given commodity or asset at a set price on a designated date in the future.

Forward Price

The predetermined price agreed upon in a forward contract, at which the asset will be bought or sold at a future date.

European Call

A call option that can only be exercised on the expiration date, not before.