Good Corp. issued 20,000 shares of $5 par common stock at $10 per share. On Dece

Question

Good Corp. issued 20,000 shares of $5 par common stock at $10 per share. On December 31, year 1, Good's retained earnings were $300,000. In March year 2, Good reacquired 5,000 shares of its common stock at $20 per share. In June year 2, Good sold 1,000 of these shares to its corporate officers for $25 per share. Good uses the cost method to record treasury stock. Net income for the year ended December 31, year 2, was $50,000. At December 31, year 2, what amount should Good report as retained earnings?

Explanation / Answer

GOODS RETAINNED EARNNINGS OF YEAR 1 = $300000

GOODS RETAINNED EARNNINGS OF YEAR 2 = $50000

TOTAL RETAINNED EARNNING TO BE REPORTED BY GOODS AT YEAR 2 ($300000 + $50000) = $350000

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