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Cal Cookie Company (CCC) has 100 million shares of $1 par common stock authorized. The transactions below caused changes in CCC's outstanding shares.

January 4, 2016 Repurchased and retired 1 million shares at $8 per share
June 25, 2016 Repurchased and retired 2 million shares at $2 per share
Prior to the transactions, CCC's shareholder's equity included the following:
Common stock, 80 million shares at $1 par $80,000,000
Paid-in-Capital - excess of par160,000,000
Retained Earnings 120,000,000
Required:
Record entries for the above transactions. Please show work

User Ethanneff
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1 Answer

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Final answer:

To record the transactions of Cal Cookie Company (CCC), you will need to update the outstanding shares after each repurchase and retirement. For the January 4, 2016 transaction, 1 million shares were repurchased and retired at $8 per share. For the June 25, 2016 transaction, 2 million shares were repurchased and retired at $2 per share. After these transactions, the updated shareholder's equity will be: Common stock: 77 million shares at $1 par, Paid-in-Capital - excess of par: $148,000,000, and Retained Earnings: $120,000,000.

Step-by-step explanation:

To record the transactions of Cal Cookie Company (CCC), we need to update the outstanding shares after each repurchase and retirement.

January 4, 2016

Repurchased and retired 1 million shares at $8 per share:

  • Decrease in outstanding shares: 1 million
  • Decrease in common stock: $1 million (1 million shares x $1 par value)
  • Decrease in paid-in-capital excess of par: $8 million (1 million shares x $8 repurchase price)

June 25, 2016

Repurchased and retired 2 million shares at $2 per share:

  • Decrease in outstanding shares: 2 million
  • Decrease in common stock: $2 million (2 million shares x $1 par value)
  • Decrease in paid-in-capital excess of par: $4 million (2 million shares x $2 repurchase price)

After these transactions, the updated shareholder's equity will be:

  • Common stock: 77 million shares at $1 par ($77,000,000)
  • Paid-in-Capital - excess of par: $148,000,000
  • Retained Earnings: $120,000,000

User Allen Chou
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