per Wiley, the answer is 125000. I don't understand explanation. See below. can some one who understands help?
This answer is correct. The solutions approach is to analyze each transaction to determine its effect on additional paid-in-capital.
1/5/Y1 $100,000
7/14/Y1 (25,000)
12/27/Y1 50,000
12/31/Y1 APIC $125,000
On 1/5/Y1, 20,000 shares are issued at an amount $5 above par ($15 – $10), resulting in a credit to additional paid-in capital in excess of par of $100,000 (20,000 × $5). On 7/14/Y1, 5,000 treasury shares are purchased at $17 per share. Using the par value method, treasury stock is debited for par value (5,000 × $10 = $50,000) and any excess over par from the original issuance (5,000 × $5 = $25,000) is taken off the books. Any difference between the original issue price ($50,000 + $25,000 = $75,000) and the cash paid to reacquire shares (5,000 × $17 = $85,000) is debited to retained earnings.
Treasury stock 50,000
APIC in excess of par 25,000
Retained earnings 10,000
Cash
85,000
On 12/27/Y1, the 5,000 shares are reissued at an amount $10 above par ($20 – $10), resulting in a credit to additional paid-in capital in excess of par of $50,000 (5,000 × $10).
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