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Explain: when a firm sells treasury stock for more than cost

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When common stock has a par value:
a. the liability of the stockholders is limited to the par value.
b. there will probably be additional paid-in capital in the balance sheet.
c. the market value of the stock will be higher than if there is no par value.
d. the paid-in capital will equal the par value of the number of shares issued.

10. If a firm sells treasury stock for more than its cost:
a. a gain is recognized in the income statement.
b. retained earnings is increased.
c. additional paid-in capital is increased.
d. total owners' equity does not change.

11. The statement of changes in retained earnings for the year shows:
a. the retained earnings balance at the beginning of the year.
b. amounts received from the sale of additional common stock during the year.
c. extraordinary gains or losses during the year.
d. the effect of a stock split during the year.

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When common stock has a par value:
b. there will probably be additional paid-in capital in the balance sheet.
Par values are made very small and so it is rare that they are sold for the par value. The ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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