Question

Eho Corporation was organized on January 1, 2019, with an authorization of 600,000 ordinary shares with...

Eho Corporation was organized on January 1, 2019, with an authorization of 600,000 ordinary shares with a par value of €5 per share. During 2019, the corporation had the following capital transactions: (1) On January 5, issued 50,000 shares at €5.8 per share. (2) On May 8, purchased 300 shares from the market at €62 per share. (3) On July 28, sold 80 shares held in treasury at €60 per share. (4) On December 31, sold 40 shares held in treasury at €68 per share. Eho used the cost method to record the purchase and reissuance of the treasury shares. (Three questions are based on this information.) What is the amount of Retained Earnings as a result of these transactions?

Select one:

a. €400.

b. None of these answers.

c. €160.

d. €80.

e. €0.

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Homework Answers

Answer #1
Date Account Title Debit Credit
Jan. 5 Cash ( 50000 * 5.8 ) 290000
Common stock ( 50000 * 5 ) 250000
Addl. PIC 40000
May-08 Treasury Stock ( 300 * 62 ) 18600
Cash 18600
Jul-28 Cash ( 80 * 60) 4800
Retained earnings ( balancing figure ) 160
Treasury Stock ( 80 * 62 ) 4960
Note :- Here the loss is 80 * 2 = 160 but this loss is too big to be absorbed
by the Paid in capital - share repurchase account as it has no balance therefore,$ 160 will be
tfd. to Retained earnings account.
Dec. 31 Cash ( 40 * 68) 2720
Treasury Stock ( 40 * 62 ) 2480
Paid in capital - share repurchase 240
Answer - Balance in RE = 160 debit
Option C is correct
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