On June 1 of this year, R Corporation redeemed 200 of its 1,000 shares of common stock outstanding for $300,000.R's E&P immediately before the redemption was $500,000.Due to the redemption, R's E&P will decrease by
A)$300,000
B)$60,000
C)$100,000
D)$200,000
E)None of the above

Question

Quizplus · Accepted Answer

The decrease in E&P due to a stock redemption is typically proportional to the percentage of shares redeemed. Since 200 out of 1,000 shares were redeemed, this represents 20% of the total shares. Therefore, 20% of the E&P ($500,000) is $100,000.

On June 1 of This Year, R Corporation Redeemed 200