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Use the following information to answer questions 6, 7, and 8. On 1-1-YR01 the Stockholders' Equity of Nedderman Company was as follows: Account Common Stock
Use the following information to answer questions 6, 7, and 8. On 1-1-YR01 the Stockholders' Equity of Nedderman Company was as follows: Account Common Stock ($10 par) Paid in Capital - Common Paid in Capital - Treasury Stock Retained Earnings Total Balance $3,000 600 100 500 4,200 6. Assume the company paid $30 per share (cash) to purchase 10 shares of its own common stock to hold as treasury shares. Also assume the company paid a $20 broker's fee related to the purchase. The entry to record this transaction, assuming use of the cost method to account for treasury stock, would be: a. Treasury Stock Broker's Fee Expense Cash 300 20 320 320 b. Treasury stock Cash 320 c. Treasury stock Paid in Capital - Treasury Stock Cash 100 220 320 d. Common stock Paid in Capital - Common Treasury Stock Cash 100 20 200 320 e. None of the above. 7. If the company later sold 6 of the treasury shares for $20 each, and paid a broker's fee of $10 the entry would be (assume use of the cost method): a. Cash Paid in Capital - Treasury Stock Treasury Stock 110 82 192 b. Cash Paid in Capital - Treasury Stock Treasury Stock 110 70 180 c. Cash Broker's Fee Expense Paid in Capital - Treasury Stock Treasury Stock 110 10 60 180 d. Cash Loss on Sale of Treasury Stock Treasury Stock 110 82 192 e. None of the above
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