In 2008, Fogg inc. issued $10 par value common stock for $25 per share. No other common stock transactions occurred until March 31, 2010, when Fogg acquired some of the issued shared for $20 per share and retired them. Which of the following statements correctly states an effect of this acquisition and retirement?

A.      2010 net income is decreased

B.      2010 net income is increased

C.      Additional paid in capital is decreased

D.      Retained Earnings is increased

The correct answer is C.

Can someone make sure if I am doing the right JE –

Assume Fogg issued 10 shares and bought back 4 shares.

Issued   :

 Dr. Cash 250

                 Cr.           C/S              100

                Cr.             APIC-c/s      150

Acquired back- I assume cost method of T/S

Dr.  T/S   80

Cr.         Cash   80

Retired:

Dr. C/S            40

Dr. APIC-C/S  60

         Cr. T/S               80

        Cr. APIC-T/S      20

So the net effect of APIC is 40 decreased.

Acquried back – I assume Par value method of T/S

Dr. T/S             40

Dr. APIC-C/S  60

        Cr. Cash             80

        Cr. APIC-T/S      20

Retired-

Dr. C/S     40

        Cr. T/S    40

So the net effect of APIC is 40 decreased.  Thus, doesn’t matter what method we use, the conclusion is that APIC is decreased. Am I correct???