Ask Question
4 July, 11:35

At its date of incorporation, Sheffield Corp. issued 111000 shares of its $10 par common stock at $13 per share. During the current year, Sheffield acquired 21000 shares of its common stock at a price of $18 per share and accounted for them by the cost method. Subsequently, these shares were reissued at a price of $14 per share. There have been no other issuances or acquisitions of its own common stock.

What effect does the reissuance of the stock have on the following accounts?

Retained Earnings Additional Paid-in Capital

+1
Answers (1)
  1. 4 July, 14:37
    0
    Retained Earnings decreases by $84,000

    There would be a no effect in the Additional Paid-in Capital

    Explanation:

    The journal entry to record the retained eaning would be as follows:

    Debit Credit

    Cash $294,000

    Retained earnings $84,000

    Treasury stock $378,0000

    Retained Earnings decreases by $84,000

    Cash = 21,000 shares*14=$294,000

    Retained earnings=21,000 shares * (18-14) = $84,000

    Treasury stock=21,000 shares*18=$378,0000

    There would be a no effect in the Additional Paid-in Capital

    So Retained Earnings decreases by $84,000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “At its date of incorporation, Sheffield Corp. issued 111000 shares of its $10 par common stock at $13 per share. During the current year, ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers