When callable preferred stock is recalled, if the recall price exceeds the total of the par value in the preferred stock account and the additional paid-in capital associated with the recalled preferred stock, the difference is
A)credited to Retained Earnings
B)credited to Additional Paid-in Capital on Preferred Stock
C)debited to Retained Earnings
D)credited to Loss from Recall of Preferred Stock

Question

Quizplus · Accepted Answer

When callable preferred stock is recalled for a price that exceeds the total of its par value and any additional paid-in capital, the excess is considered a cost to the company. This cost is debited to Retained Earnings, reflecting a reduction in the equity available to shareholders.

When Callable Preferred Stock Is Recalled, If the Recall Price