As of December 31, 2016, Warner Corporation reported the following: During 2017,

Question

As of December 31, 2016, Warner Corporation reported the following:

  

  

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.

  

  

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

  Dividends payable $32,000   Treasury stock 720,000   Paid-in capital - share repurchase 32,000   Other paid-in capital accounts 5,200,000   Retained earnings $4,200,000

Explanation / Answer

correct option is "B" = Reduce retained earnings by $64,000

[cost = 720000/2 = 360000

Difference in cost and sale value = 360000-264000 = 96000]

Firest it will be debited to share repurchase -paid in capital = 32000

Remaining will be adjusted from retained earning = 96000-32000 = 64000

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