As of December 31, 2018, Warner Corporation reported the following: Dividends pa

Question

As of December 31, 2018, Warner Corporation reported the following: Dividends payable $ 20,000 Treasury stock 600,000 Paid-in capital—share repurchase 20,000 Other paid-in capital accounts 4,000,000 Retained earnings 3,000,000 During 2019, half of the treasury stock was resold for $240,000; net income was $600,000; cash dividends declared were $1,500,000; and stock dividends declared were $500,000. The 2019 sale of half of the treasury stock would: Multiple Choice Reduce income before tax by $60,000. Reduce retained earnings by $60,000. Increase total shareholders' equity by $300,000. Reduce retained earnings by $40,000.

Explanation / Answer

Answer

increase total shareholders equity by $ 300000

journal entry

cash A /c Dr 240000

additional paid in capital from treasury A /c Dr 60000

To treasury stock A /c 300000

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