Question

The shareholders’ equity section of the balance sheet of ABC Inc. included the following accounts at December 31, 2017

Shareholders’ Equity	($ in millions)
Common stock, 240 million shares at $1 par	$ 240
Paid-in capital—excess of par	1,680
Paid-in capital—share repurchase	1
Retained earnings	1,100

In subsequent years, ABC reacquired shares of its common stock and later sold shares in two separate transactions. ABC consider the repurchased shares as retired shares:

1. On February 5, 2018, ABC purchased 6 million shares at $10 per share.
2. On July 9, 2018, the corporation sold 2 million shares at $12 per share.
3. On November 14, 2020, the corporation sold 2 million shares at $7 per share.

Required:

Prepare the shareholders’ equity section of ABC balance sheet at December 31, 2020. Assume net income earned in 2018–2020 were distributed to shareholders as cash dividends.

Answer 1

Shareholder's Equity	Retirement	explanation
Paid in Capital:
Common stock	$238	$240-6+2+2
Paid-in capital—excess of par	$1,672	$1680-42+22+12
Retained earnings	$1089	$1100-11
Total Shareholder's Equity	$2999

common stock
co purchase 6million *1(parvalue )	6
co sold 2million *1	2
co sold 2 million *1	2

co purchsed share so give cash 6million *10 = 60 million
the actuall price is 1 per share so value = - 6 million
co pay excess amount on purchase 1680/240*6 = -42
paid in share repurchase = -1
co pay from retained earning balance = 11

paid in excess par
when co purchase 6 miliion co pay excess par =1680/240*6	(42)
when co sold 2 million co receive excess (selling price 12 -1 par value )=11*2million	+22
on nov when co sold 2 million co receive excess (7 selling price -1 par value )=6*2	+12