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2 October, 00:30

Emma, Inc. reacquired 166,326 of its shares at $22 per share as treasury stock. Last year, for the first time, Emma sold 37,992 treasury shares at $27 per share. By what amount will Emma's retained earnings decline if it now sells 48,987 treasury shares at $15 per share

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  1. 2 October, 00:43
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    The correct answer is $152,949.

    Explanation:

    According to the scenario, the given data are as follows:

    Reacquired shares = 166,326

    Per share price = $22

    So, we can calculate the retained earning decline by using following formula:

    Retained earning decline = Cost of Treasury shares - Sales price - Paid in Capital from stock

    Where, Cost of treasury shares = 48,987 * $22 = $1,077,714

    Now Sales Price = 48,987 * $15 = $734,805

    and Paid in Capital from stock = 37,992 * ($27 - $22) = $189,960

    By putting the value in the formula, we get:

    Retained earning decline = $1,077,714 - $734,805 - $189,960

    = $152,949
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Home » Business » Emma, Inc. reacquired 166,326 of its shares at $22 per share as treasury stock. Last year, for the first time, Emma sold 37,992 treasury shares at $27 per share.
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