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During 2017, half of the treasury stock was resold for $264,000; net income was $720,000; cash dividends declared were $1,620,000; and stock dividends declared were $620,000.
The 2017 sale of half of the treasury stock would:__________
Reduce retained earnings by $96,000
Reduce retained earnings by $64,000
Increase total shareholders' equity by $360,000
Reduce income before tax by $96,000

Sagot :

Answer:

The answer is "Reduce retained earnings by [tex]\$64,000[/tex]"

Explanation:

cost [tex]= \frac{720000}{2} = 360000[/tex]

The difference between the cost and sale [tex]= 360000-264000 = 96000[/tex]

First, buyback shares -payment of capital are debited = 32000

The rest is retained earnings adjusted

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