Question

On January 1, 2017, Neda Kalantar Corp, a publicly traded company, had these shareholders’ equity accounts:...

On January 1, 2017, Neda Kalantar Corp, a publicly traded company, had these shareholders’ equity accounts:

Common shares (Unlimited number of shares authorized, 12,000 issued): $600,000

Contributed capital: $40,000
Retained earnings: $2,200,000

On February 1 the company reacquired and retired 2,000 common shares for $75.00 per share. The stock’s market price was $73.00.

Calculate the balance in number of common shares, dollars of common shares, dollars of contributed capital and dollars of retained earnings after the above transactions at February 1st, 2017, after the reacquisition.

January 1, 2017

February 1, 2017

Number of common shares

12,000
Common Shares

$600,000

Contributed capital

$40,000

Retained earnings

 $2,200,000
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Answer #1
January 1, 2017 February 1, 2017
Number of common shares 12000 12000-2000=10000
common Shares 600000 600000-100000=500000
Contributed capital 40000 40000-6667= 33333
Retained earnings 2200000 2200000-43333= 2156667

working :

Par value per share = 600000/12000 =$ 50 per share

Contributed capital = 40000/12000 = $ 3.33333 per share

Journal entry in case of retirement:

Account title Debit credit
common stock (2000*50) 100000
contributed capital (2000*3.33333) 6667
Retained earning 43333
cash (2000*75) 150000
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