Question

The Jennings Group reacquired 2 million of its shares at $70 per share as treasury stock. Last year, for the first time, Jennings sold 1 million treasury shares at $71 per share. By what amount will Jennings’ retained earnings decline if it now sells the remaining 1 million treasury shares at $67 per share?

Answer 1

Thge retained earnings account will decrease by 2,000,000

Step-by-step explanation:

treasury stock cost: $70 per share.

treasury stock 140,000,000 debit

cash 140,000,000 credit

it sold 1,000,000 shares to 71 dollars

cash 71,000,000 debit

treasury stock 70,000,000 credit

additonal paid-in TS 1,000,000 credit

and then sales 1,000,000 to 67 dollars

cash 67,000,000 debit

additional paid-in TS 1,000,000 debit

retained earnings 2,000,000 debit

treasury stock 70,000,000 credit