Question

The Jennings Group reacquired 2 million of its shares at $70 per share as treasury stock. Last year, for the first time, Jennings sold 1 million treasury shares at $71 per share. By what amount will Jennings’ retained earnings decline if it now sells the remaining 1 million treasury shares at $67 per share?

Answer 1

Answer:

Thge retained earnings account will decrease by 2,000,000

Explanation:

treasury stock cost: $70 per share.

treasury stock 140,000,000 debit

              cash                   140,000,000 credit

it sold 1,000,000 shares to 71 dollars

cash         71,000,000 debit

  treasury stock        70,000,000 credit

  additonal paid-in TS 1,000,000 credit

and then sales 1,000,000 to 67 dollars

cash                          67,000,000 debit

additional paid-in TS 1,000,000 debit

retained earnings      2,000,000 debit

   treasury stock                          70,000,000 credit