e of $100,000 in the con

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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CAP Corporation has reacquired 50,000 of its
shares at $13 per share. The average cost of these
shares was $11 per share and there was a prior
credit balance of $100,000 in the contributed
surplus account. Assuming the balance in the
contributed surplus account is the result of prior
transactions relating to the shares now being
reacquired, the effect on retained earnings would
be as follows:
a) a credit of $100,000.
b) a credit of $650,000.
c) a debit of $100,000.
d) no impact.
Transcribed Image Text:CAP Corporation has reacquired 50,000 of its shares at $13 per share. The average cost of these shares was $11 per share and there was a prior credit balance of $100,000 in the contributed surplus account. Assuming the balance in the contributed surplus account is the result of prior transactions relating to the shares now being reacquired, the effect on retained earnings would be as follows: a) a credit of $100,000. b) a credit of $650,000. c) a debit of $100,000. d) no impact.
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