Use the following information for next 10 questions. On March 1, 2009, the Miran

Question

Use the following information for next 10 questions.

On March 1, 2009, the Miranda Company purchased 2,000 shares of its common stock for $25 per share for the treasury. On July 1, 2009, 1,000 of the treasury shares were sold for $30 per share.  On October 1, 2009, 1,000 of the treasury shares were sold at $15 per share.

On January 1, 2009, Miranda’s balance in Retained Earnings was $100,000. During the year, the company had net income of $20,000 and paid dividends of $5,000.

39. Which of the following is true regarding the purchase of Treasury stock on March 1?

a. Treasury stock decreased, and Total Equity decreased

b. Treasury stock decreased, and Total Equity increased

c. Treasury stock increased, and Total Equity decreased

d. Treasury stock increased, and Total Equity increased

e. None of the above

40. Refer to question #39. By what amount did Treasury Stock Change, if at all? ( If the account or amount did not change, state your answer as "$0")

41. Refer to question #39. By what amount did Total Equity Change, if at all? ( If the account or amount did not change, state your answer as "$0")

42. Which of the following is true regarding the sale of Treasury stock on July 1?

a. Treasury stock decreased and Total Equity decreased

b. Treasury stock decreased and Total Equity increased

c. Treasury stock increased and Total Equity decreased

d. Treasury stock increased and Total Equity increased

e. None of the above

43. Refer to question #42. By what amount did Treasury Stock Change, if at all? ( If the account or amount did not change, state your answer as "$0")

a. Treasury stock decreased and Total Equity decreased

b. Treasury stock decreased and Total Equity increased

c. Treasury stock increased and Total Equity decreased

d. Treasury stock increased and Total Equity increased

e. None of the above

44. Refer to question #42. By what amount did Total Equity change, if at all? ( If the account or amount did not change, state your answer as "$0")

45. Which of the following is true regarding the sale of treasury stock on October 1?

a. Treasury Stock decreased and Total Equity decreased

b. Treasury Stock decreased and Total Equity increased

c.Treasury Stock increased and Total Equity decreased

d. Treasury Stock increased and Total Equity increased

e. None of the above

46. Refer to question #45. By what amount did Treasury Stock Change, if at all? ( If the account or amount did not change, state your answer as "$0")

47. Refer to question #45. By what amount did Total Equity change, if at all? ( If the account or amount did not change, state your answer as "$0")

48. What is the balance in Retained earnings at the end of the year?

Explanation / Answer

Solution 39:

With purchase of treasury stock, "Treasury stock increased, and Total Equity decreased"

Hence option c is correct.

Solution 40:

Amount by which treasury stock change on purchase = 2000 * $25 = $50,000 Increase

Solution 41:

Amount by which total equity change on purchase of purchase of treasury stock = 2000 * $25 = $50,000 decrease

Solution 42:

The true statement is on sale of treasury stock, "Treasury stock decreased and Total Equity increased"

Hence option B is correct.

Solution 43:

Amount by which treasury stock change on sale of treasury stock on July 1 = Account - Treasury stock, Amount = 1000 * $25 = $25,000 decrease

Note: I have answered more than required parts of the question as per chegg policy, kindly post separate question for answer of remaining parts.

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