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A company originally issues par value common stock at an amount above par. Subsequently, the company reacquires the shares for more than the issue price and immediately retires the shares. The company has no previous transactions for stock repurchases. Which of the following accounts would be reduced for the repurchase and retirement of the shares? (Select all that apply.)
(_) common stock
(_) investment in securities
(_) retained earnings
(_) other comprehensive income
(_) paid-in capital in excess of par
common stock
retained earnings
paid-in capital in excess of par

Respuesta :

The accounts that would be reduced for repurchase and retirement of the shares are common stock and retained earnings.

What are retained earnings?

The total net income that a firm has earned and has decided to keep on hand at a specific moment, like the end of the reporting quarter, is known as retained earnings. The Profit and Loss Account's current net income (or net loss) is moved from it to the retained earnings account at the conclusion of the specified time period. The term "accumulated losses," "retained losses," "accumulated deficit," or other similar terms may be used if the retained earnings account balance is negative. Any portion of a credit balance in the account may be capitalised by issuing bonus shares, and the remaining balance is carried over to the following quarter and may be used for shareholder dividend distributions.

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