Horton Industries' shareholders' equity included 140 million shares of $1 par common stock and a balance in paid-in capital - excess of par of $1,120 million. Assuming that Horton retires shares it reacquires (restores their status to that of authorized but unissued shares), by what amount will Horton's total paid-in capital decline if it reacquires 2 million shares at $7.00 per share? (Enter your answer in millions (i. e., 10,000,000 should be entered as 10).)

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Business

Natasha Shelton

17 October, 10:33

Horton Industries' shareholders' equity included 140 million shares of $1 par common stock and a balance in paid-in capital - excess of par of $1,120 million. Assuming that Horton retires shares it reacquires (restores their status to that of authorized but unissued shares), by what amount will Horton's total paid-in capital decline if it reacquires 2 million shares at $7.00 per share? (Enter your answer in millions (i. e., 10,000,000 should be entered as 10).)

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Cassandra Rangel · Answer 1

The total paid-in capital declines by $17 million

Explanation:

The necessary entries to record the repurchase of shares are as follows:

Dr Common stock $1*2,000,000 $2,000,000

Dr Paid-in capital in excess of par

1120*140*2000,0000 $ 16,000,000

Cr Cash $7*2000,000 $14,000,000

Cr Share repurchase (balancing figure) $4,000,000

Invariably, the paid-in capital declines by the difference the total of common stock and paid-in capital in excess of par ($2m+$16m) and the share repurchase, hence the it declines by $17 million