Table 14-3
Following is the shareholders' equity section of the balance sheet of Monty Corporation:
$$\begin{array} { | l| r | }
\hline \text { Contributed capital: } & \
\hline \text { Preferred shares, } \$ 2.50 \text {, cumulative, } 35,000 \text { shares } & \
\hline \text { authorized, } 7,000 \text { shares issued } & \$ 350,000 \
\hline \text { Common shares, } 140,000 \text { shares authorized, } & \
\hline 50,000 \text { shares issued } & 452,500 \
\hline\
\hline \text { Total contributed capital } & 802,500 \
\hline \text { Retained earnings } & 204,500 \
\hline \text { Total shareholders' equity } & \$ 1,007,000 \
\hline
\end{array}$$
-Refer to Table 14-3.The entry to record Monty's purchase of 10,000 of its common shares at $7.50 per share includes a:

Question

Table 14-3
Following is the shareholders' equity section of the balance sheet of Monty Corporation:
 $$\begin{array} { | l| r | } 
\hline \text { Contributed capital: } & \
\hline \text { Preferred shares, } \$ 2.50 \text {, cumulative, } 35,000 \text { shares } & \
\hline \text { authorized, } 7,000 \text { shares issued } & \$ 350,000 \
\hline \text { Common shares, } 140,000 \text { shares authorized, } & \
\hline 50,000 \text { shares issued } & 452,500 \
\hline\
\hline \text { Total contributed capital } & 802,500 \
\hline \text { Retained earnings } & 204,500 \
\hline \text { Total shareholders' equity } & \$ 1,007,000 \
\hline
\end{array}$$
-Refer to Table 14-3.The entry to record Monty's purchase of 10,000 of its common shares at $7.50 per share includes a:

Quizplus · Accepted Answer

When a company repurchases its own shares, the entry includes a credit to cash or other assets and a debit to contributed surplus-share repurchase for the difference between the cost of the shares and their par value. In this case, the shares were purchased for $7.50 per share, which is higher than their par value, so the debit to contributed surplus-share repurchase would be the difference between $7.50 and the par value of the shares (which is not given in the table). The amount of the debit would be $15,500, as shown in option D. This entry does not affect retained earnings or common shares.

Table 14-3 Following Is the Shareholders' Equity Section of the Balance

Table 14-3
Following Is the Shareholders' Equity Section of the Balance