D is corrent. The solutions approach is to make the journal entry to record the retirement.| Common stock | 1,000,000 | | | Additional paid-in capital | 300,000 | | | Retained earnings | 500,000 | | | | 1,800,000 |
Common stock is debited for $1,000,000 par value ($10 per share × 100,000 shares). APIC can be debited for either the APIC from previous retirements or the pro rata portion of APIC for the current issue; the second alternative applies to this question. One-ninth of the shares of common stock are retired, so one-ninth of APIC can be debited for $300,000. An additional debit to RE is required for $500,000 ($1,800,000 - $1,000,000 - $300,000). Therefore, the balances of APIC and RE after retirement of 100,000 shares are $2,400,000 ($2,700,000 - $300,000) and $800,000 ($1,300,000 - $500,000) respectively.A is incorrect. The solutions approach is to make the journal entry to record the retirement.| Common stock | 1,000,000 | | | Additional paid-in capital | 300,000 | | | Retained earnings | 500,000 | | | | 1,800,000 |
Common stock is debited for $1,000,000 par value ($10 per share × 100,000 shares). APIC can be debited for either the APIC from previous retirements or the pro rata portion of APIC for the current issue; the second alternative applies to this question. One-ninth of the shares of common stock are retired, so one-ninth of APIC can be debited for $300,000. An additional debit to RE is required for $500,000 ($1,800,000 - $1,000,000 - $300,000). Therefore, the balances of APIC and RE after retirement of 100,000 shares are $2,400,000 ($2,700,000 - $300,000) and $800,000 ($1,300,000 - $500,000) respectively.B is incorrect. The solutions approach is to make the journal entry to record the retirement.| Common stock | 1,000,000 | | | Additional paid-in capital | 300,000 | | | Retained earnings | 500,000 | | | | 1,800,000 |
Common stock is debited for $1,000,000 par value ($10 per share × 100,000 shares). APIC can be debited for either the APIC from previous retirements or the pro rata portion of APIC for the current issue; the second alternative applies to this question. One-ninth of the shares of common stock are retired, so one-ninth of APIC can be debited for $300,000. An additional debit to RE is required for $500,000 ($1,800,000 - $1,000,000 - $300,000). Therefore, the balances of APIC and RE after retirement of 100,000 shares are $2,400,000 ($2,700,000 - $300,000) and $800,000 ($1,300,000 - $500,000) respectively.C is incorrect. The solutions approach is to make the journal entry to record the retirement.| Common stock | 1,000,000 | | | Additional paid-in capital | 300,000 | | | Retained earnings | 500,000 | | | | 1,800,000 |
Common stock is debited for $1,000,000 par value ($10 per share × 100,000 shares). APIC can be debited for either the APIC from previous retirements or the pro rata portion of APIC for the current issue; the second alternative applies to this question. One-ninth of the shares of common stock are retired, so one-ninth of APIC can be debited for $300,000. An additional debit to RE is required for $500,000 ($1,800,000 - $1,000,000 - $300,000). Therefore, the balances of APIC and RE after retirement of 100,000 shares are $2,400,000 ($2,700,000 - $300,000) and $800,000 ($1,300,000 - $500,000) respectively. |
