A corporation purchases 200 of its common shares for $12 per share.The shares had originally been issued at $11.The 200 shares represent the first time the corporation has engaged in a repurchased shares transaction.The entry to repurchase the shares will involve a debit to retained earnings for $200.

Question

Quizplus · Accepted Answer

The repurchase of shares reduces the number of shares outstanding, which increases the book value per share. The debit to retained earnings is for the difference between the repurchase price and the original issuance price, which is $1 per share.

A Corporation Purchases 200 of Its Common Shares for $12