Questions on Repurchasing Stock Previously Issued – Par Method

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  • May 25, 2014 at 3:13 pm #185820
    Anonymous
    Inactive

    When you are repurchasing stock previously issued under the par method, why and when do you make a debit to Retained Earnings? I know you:

    Dr. Treasury Stock (Shares purchased x par value)

    Cr. Cash (Shares purchase x purchase price)

    But the Dr. to APIC I thought was the only plug or the number of shares purchased x (purchase price – par value), however, a few examples show to split this amount between APIC – common and Retained Earnings. How do you come up with the Retained Earnings portion?

Viewing 12 replies - 1 through 12 (of 12 total)
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  • May 25, 2014 at 3:20 pm #556766
    accountabergs
    Participant

    Buy back above issue price:

    Dr. T-stock

    Dr. APIC- CS (issue price – par value)

    Dr. RE (cost – issue price)

    Cr.

    Passed in 2014

    FAR- (5/27) 88
    REG- (2/20) 70, Rematch: (7/2)83
    BEC- (4/2) 85
    AUD- (4/24) 87

    Using Becker live classes and online materials

    "if you get confused, listen to the music play"

    May 25, 2014 at 3:20 pm #556767
    accountabergs
    Participant

    Buy back above issue price:

    Dr. T-stock

    Dr. APIC- CS (issue price – par value)

    Dr. RE (cost – issue price)

    Cr.

    Passed in 2014

    FAR- (5/27) 88
    REG- (2/20) 70, Rematch: (7/2)83
    BEC- (4/2) 85
    AUD- (4/24) 87

    Using Becker live classes and online materials

    "if you get confused, listen to the music play"

    May 25, 2014 at 3:22 pm #556768
    accountabergs
    Participant

    Cr. Cash

    *Issue price is the original price issued to common stock, and cost is what you paid for the T-stock

    Buy Back Below issue price:

    Dr. T-stock

    Dr. APIC (issue price – par)

    Cr. Cash

    Cr. APIC- TS (plug)

    Passed in 2014

    FAR- (5/27) 88
    REG- (2/20) 70, Rematch: (7/2)83
    BEC- (4/2) 85
    AUD- (4/24) 87

    Using Becker live classes and online materials

    "if you get confused, listen to the music play"

    May 25, 2014 at 3:22 pm #556769
    accountabergs
    Participant

    Cr. Cash

    *Issue price is the original price issued to common stock, and cost is what you paid for the T-stock

    Buy Back Below issue price:

    Dr. T-stock

    Dr. APIC (issue price – par)

    Cr. Cash

    Cr. APIC- TS (plug)

    Passed in 2014

    FAR- (5/27) 88
    REG- (2/20) 70, Rematch: (7/2)83
    BEC- (4/2) 85
    AUD- (4/24) 87

    Using Becker live classes and online materials

    "if you get confused, listen to the music play"

    May 25, 2014 at 3:31 pm #556770
    Anonymous
    Inactive

    So when the stock is repurchased above the issue price, you ALWAYS make a debit to R/E? The becker book said to do this only if there isn't enough APIC-treasury to debit against, but at this point, there shouldn't be any apic-treasury.

    May 25, 2014 at 3:31 pm #556771
    Anonymous
    Inactive

    So when the stock is repurchased above the issue price, you ALWAYS make a debit to R/E? The becker book said to do this only if there isn't enough APIC-treasury to debit against, but at this point, there shouldn't be any apic-treasury.

    May 25, 2014 at 3:33 pm #556772
    accountabergs
    Participant

    Yes, I believe your reasoning is correct. But at the same time, I can't 100% confirm that.

    Passed in 2014

    FAR- (5/27) 88
    REG- (2/20) 70, Rematch: (7/2)83
    BEC- (4/2) 85
    AUD- (4/24) 87

    Using Becker live classes and online materials

    "if you get confused, listen to the music play"

    May 25, 2014 at 3:33 pm #556773
    accountabergs
    Participant

    Yes, I believe your reasoning is correct. But at the same time, I can't 100% confirm that.

    Passed in 2014

    FAR- (5/27) 88
    REG- (2/20) 70, Rematch: (7/2)83
    BEC- (4/2) 85
    AUD- (4/24) 87

    Using Becker live classes and online materials

    "if you get confused, listen to the music play"

    May 25, 2014 at 3:34 pm #556774
    LStevens225
    Participant

    Don't you only touch retained earnings if there isn't enough in apic to cover the original purchase par value back? If there enough in apic you don't touch retained earnings is what I thought.

    May 25, 2014 at 3:34 pm #556775
    LStevens225
    Participant

    Don't you only touch retained earnings if there isn't enough in apic to cover the original purchase par value back? If there enough in apic you don't touch retained earnings is what I thought.

    May 25, 2014 at 3:42 pm #556776
    accountabergs
    Participant

    @LStevens225- I think you are right (if you repurchase at the issue price or less?) And from digi's post before that, the reduction in APIC is from the APIC-CS, not APIC-TS. The APIC-TS only gets credited when you buy back below the issue price (somewhat as a gain). Therefore, there should theoretically be some APIC that you can debit right off the bat…right?

    Passed in 2014

    FAR- (5/27) 88
    REG- (2/20) 70, Rematch: (7/2)83
    BEC- (4/2) 85
    AUD- (4/24) 87

    Using Becker live classes and online materials

    "if you get confused, listen to the music play"

    May 25, 2014 at 3:42 pm #556777
    accountabergs
    Participant

    @LStevens225- I think you are right (if you repurchase at the issue price or less?) And from digi's post before that, the reduction in APIC is from the APIC-CS, not APIC-TS. The APIC-TS only gets credited when you buy back below the issue price (somewhat as a gain). Therefore, there should theoretically be some APIC that you can debit right off the bat…right?

    Passed in 2014

    FAR- (5/27) 88
    REG- (2/20) 70, Rematch: (7/2)83
    BEC- (4/2) 85
    AUD- (4/24) 87

    Using Becker live classes and online materials

    "if you get confused, listen to the music play"

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