On December 31, year 1, Good Corp.’s board of directors canceled 50,000 shares of $2.25 par value common stock held in treasury at an average cost of $13 per share. Before recording the cancellation of the treasury stock, Good had the following balances in its stockholders’ equity accounts: Common stock $540,000 Additional paid-in capital 750,000 Retained earnings 900,000 Treasury stock, at cost 650,000 In its balance sheet at December 31, year 1, Good should report a common stock balance of
Answer : $ 427500
Working notes for the above answer is as follow
When treasury stock is cancelled (retired), the common stock account is reduced by the par value of the common stock cancelled.
directors canceled 50,000 shares of $2.25
balances in its stockholders’ equity accounts: Common stock $540,000
The ending common stock account balance is as follow
= $540,000 – 50,000($2.25).
=$ 427500
