Eff Ltd. was organized on January 2, 2020, with 100,000 no par value common shares authorized. During 2020, Eff had the following capital transactions: Jan 5 Issued 75,000 shares at $ 14 per share
Jul 27 Purchased and retired 5,000 shares at $ 10 per share
Nov 25 Issued 4,000 shares at $ 13 per share
What would be the balance in the Contributed Surplus account at December 31, 2020?
A) $ 0
B) $ 10,000
C) $ 20,000
D) $ 50,000

Question

Quizplus · Accepted Answer

The contributed surplus arises from the retirement of shares. When Eff Ltd. purchased and retired 5,000 shares at $10 per share, the shares were initially issued at $14 per share, creating a surplus of $4 per share. Thus, the contributed surplus is 5,000 shares * $4 = $20,000.

Eff Ltd Was Organized on January 2, 2020, with 100,000 No