both a and b real answers During 20X7, TD Ltd. repurchased 4,000 common shares a
ID: 2573224 • Letter: B
Question
both a and b
real answers
During 20X7, TD Ltd. repurchased 4,000 common shares and 2,000 preferred shares, respectively. Net income was $100,000 in 20X7, and dividends declared, $40,000. The comparative equity accounts for 20X6 and 20X7 are: 20X7 s 360,000 460,000 $1,200,000 $1,400,000 S 24,000 20x6 Preferred Shares Common Shares Contributed capital-repurchase of preferred shares Contributed capital-repurchase of common shares 0 30,000 Retained earnings 270,000 240,000 Required: 1) What was the original issue price of the common shares? The preferreds? (show your calculations) 2) What amount was paid for the common shares repurchased? The preferreds? (show your calculationsExplanation / Answer
1. Face value of common shares repurchased = $1400000 - $1200000 = $200000
No. of common shares repurchased = 4000
Original issue price of common shares = $200000/ 4000 = $50
Face value of preferred shares repurchased = $460000 - $360000 = $100000
No. of preferred shares repurchased = 2000
Original issue price of preferred shares = $100000/ 2000 = $50
2. Amount paid for common shares repurchased = Face value + Contributed capital
= $200000 + (-30000)
= $170000
Amount paid for preferred shares repurchased = Face value + Contributed capital
= $100000 + 24000
= $124000
= $62
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