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In: Accounting

Armstrong Corporation has the following shareholders' equity on December 31, 2021: Shareholders' equity Share capital ​...

Armstrong Corporation has the following shareholders' equity on December 31, 2021:

Shareholders' equity
Share capital

$10 convertible preferred shares,
10,000 shares authorized, 5,000 shares issued $570,000
Common shares,
200,000 shares authorized, 90,000 shares issued 1,800,000
Total share capital 2,370,000
Retained earnings 450,000
Total shareholders' equity $2,820,000


If 10,000 common shares were reacquired for $24 per share, the journal entry to record the transaction would

credit Contributed Surplus–Reacquisition of Shares for $40,000.

credit Retained Earnings for $40,000.

credit Common Shares for $240,000.

debit Common Shares for $200,000.

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Expert Solution

debit Common Shares for $200,000.
General Journal Debit Credit
Common Stock       200,000 (10,000 x $20)
Retained Earnings         40,000 balance
Cash      240,000 (10,000 x $24)
Par value of the common share $20.00
(1,800,000/90,000)

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