Landmark Company This company reported the following information in the stockholders' equity section of its December 31,2014,balance sheet:
$\begin{array}{ll}
\text { 7 \% Cumulative, Non-paticipating Preferred Stock, \$ 100 par, 500 } \
\text { shares authorized, issued, and outstending callable at par value } &\$ 50,000 \
\text { Common Stock, \$ 12 par, 100,000 shares authorized } &600,000 \
\text { Paid-inC apital in Excess of Par-Common Stock } &25,000 \
\text { Retained Earnings } &825,000
\end{array}$
-Refer to Landmark Company.If the company repurchased 500 shares of its common stock for $20 per share,what is the amount of total stockholders' equity after this transaction?

Question

Landmark Company This company reported the following information in the stockholders' equity section of its December 31,2014,balance sheet:
$\begin{array}{ll}
 \text { 7 \%  Cumulative, Non-paticipating Preferred Stock,  \$ 100 par, 500  } \
 \text { shares authorized, issued, and outstending callable at par value } &\$ 50,000 \
 \text { Common Stock, \$ 12  par, 100,000 shares authorized } &600,000 \
 \text { Paid-inC apital in Excess of Par-Common Stock } &25,000 \
 \text { Retained Earnings } &825,000
\end{array}$ 
-Refer to Landmark Company.If the company repurchased 500 shares of its common stock for $20 per share,what is the amount of total stockholders' equity after this transaction?

Quizplus · Accepted Answer

The repurchase of 500 shares of common stock reduces the number of outstanding shares by 500, but does not affect any other accounts in the stockholders' equity section.

The repurchase of 500 shares reduces the common stock balance by (500 x $12) = $6,000, and reduces the paid-in capital in excess of par-common stock by (500 x $20) = $10,000.

Therefore, the new stockholders' equity is: 
($50,000 + $600,000 - $6,000) + ($25,000 - $10,000) + $825,000 
= $1,469,000

So the best answer is D, $1,490,000, which is the closest option to the calculated value of $1,469,000.

Landmark Company This Company Reported the Following Information in the Stockholders