Question

# Sheridan Company was organized on January 2, 2021, with 518000 authorized shares of \$10 par value...

Sheridan Company was organized on January 2, 2021, with 518000 authorized shares of \$10 par value common stock. During 2021, Sheridan had the following capital transactions:

January 5—issued 388500 shares at \$12 per share.
July 27—purchased 25900 shares at \$9 per share.
November 25—sold 15540 shares of treasury stock at \$11 per share.

Sheridan used the cost method to record the purchase of the treasury shares. What would be the balance in the Paid-in Capital from Treasury Stock account at December 31, 2021?

 \$0.
 \$15540.
 \$31080.
 \$46620.

The balance in the Paid-in Capital from Treasury Stock account on December 31, 2021, is \$31,080

Solution-

The computation of the balance in the treasury stock account is shown below:

= Number of shares sold × (Selling price of share - purchase price of shares)

= 15,540 shares × (\$11 per share - \$9 per share)

=15,540 shares × \$2 per share

= \$31,080

Note- The other items which are mentioned like issued shares, authorized shares are irrelevant because we have to compute for the treasury stock, not for the common stock. So, these parts would be ignored in the computation part.

Thanks & all the best....

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