Which statement best describes the accounting when a company cancels its own shares at an amount higher than the average share value?
A)Contributed surplus and retained earnings will be credited.
B)Contributed surplus and retained earnings will be debited.
C)Contributed surplus will be credited,thereby increasing equity.
D)Contributed surplus will be debited,thereby decreasing equity.

Question

Quizplus · Accepted Answer

When a company cancels its own shares at an amount higher than the average share value, it typically debits contributed surplus and retained earnings. This action reflects the reduction in equity due to the payment made to cancel the shares, which exceeds the average value of the shares.

Which Statement Best Describes the Accounting When a Company Cancels