When a Firm Reacquires Common Shares Under the Constructive Retirement

When a firm reacquires common shares under the Constructive Retirement Method for Repurchased Shares:

A) the Treasury Stock-Common account has a debit balance and therefore reduces total shareholders' equity.
B) the accountant debits the Treasury Stock-Common account for the par value of the repurchased shares, debits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Retained Earnings for any difference between the repurchase price.
C) the accountant debits the Common Stock account for the par value of the repurchased shares, debits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Retained Earnings for any difference between the repurchase price.
D) the Treasury Stock-Common account has a credit balance and therefore reduces total shareholders' equity.
E) the accountant credits the Common Stock account for the par value of the repurchased shares, credits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Retained Earnings for any difference between the repurchase price.

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free