Question

1.

How should you measure a company's common stock account?

Question 7 options:

The number of common shares issued multiplied by the stock's par value per share.

The number of common shares outstanding multiplied by the stock's current market value per share

None of the answers are correct.

The number of common shares outstanding multiplied by the stock's par value per share

2.

As of December 31, 2023, Ajax Corporation reported the following: Dividends payable $25,000; Treasury stock $900,000; Paid-in capital--share repurchase $22,000; Other paid-in capital accounts $4,600,000; Retained earnings $3,010,000.

During 2024, a third of the treasury stock was resold for $240,000; net income was $825,000; cash dividends declared were $1,000,000; and stock dividends of $550,000 were declared and distributed (no fractional shares).Hint: Use a T-account to help you organized these facts.

What would total shareholders' equity be as of December 31, 2024?

Question 8 options:

$6,822,000

$7,997,000

$6,797,000

$6,247,000

3.

When it began business in 2026, Ajax, Inc. issued 100,000 shares of $2 par stock for $1,000,000. In the following year, the company repurchased 10,000 shares for $200,000. In 2028, 5,000 of the repurchased shares were resold for $160,000. In its balance sheet dated December 31, 2028, Coy, Inc.'s treasury stock account shows a balance of:

Question 9 options:

	$0
	$100,000
	$200,000
	$40,000

Answer 1

1. (d) The number of common shares outstanding multiplied by the stock's par value per share

Option a is incorrect because we dont take shares issued into account.

Option b is incorrect because current market value is not used.

2. Shareholder's Equity 2024 = SE 2023 + Resold 2024 treasury stock + 2024 net income - 2024 cash dividends

SE 2023 = 4,600,000 + 3,010,000 + 22,000 - 900,000 = 6,732,000

Shareholder's Equity 2024 = 6,732,000 + 240,000 + 825,000 - 1,000,000 = $6,797,000 (c)

3. When company repurchased, Treasury stock would have been debited with $200,000.

Cost of each share = 200,000/10,000 = $20 per share

At the time of sale of these repurchased shares, treasury account would be credited with cost i.e. 5,000 * $20 = $100,000.

Treasury stock account balance = 200,000 - 100,000 = $100,000 (b)