MC Qu. 33 LO 18-05 As of December 31, 2013, Warner... As of December 31, 2013, W

Question

MC Qu. 33 LO 18-05 As of December 31, 2013, Warner... As of December 31, 2013, Warner Corporation reported the following: Dividends payable 24,000 Treasury stock 640,000 Paid-in capital - share repurchase 24,000 Other paid-in capital accounts 4,400,000 Retained earnings 3,400,000 During 2014. half of the treasury stock was resold for $248,000; net income was $640,000; cash dividends declared were $1,540,000; and stock dividends declared were $540,000. The 2014 sale of half of the treasury stock would: Reduce income before tax by $72,000 Reduce retained earnings by $48,000 Reduce retained earnings by $72,000 L? O Increase total shareholders? equity by $320,000

Explanation / Answer

B. Reduce Retained Earning by $48,000.

Because Total loss on reissue of Treasuary Stock is $ 72,000. It will be first charged to Paid - in Capital - Share Repurchase Account($24,000). After this remaining loss of $48,000 will be charged against Retained Earning.

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