Question

6. Scotti Company had the following transactions during the year 2018: *On January 1, 2018, its first year of business, Scotti Company issued 800,000 shares of $5 par value Common Stock for $18 per share. *On July 5, 2018, Scotti repurchased 200,000 shares at $20 per share. *On August 4, 2018, Scotti reissued 50,000 of its Treasury shares at $25 per share. *On September 15, 2018, Scotti reissued 50,000 of its Treasury shares at $23 per share. *On December 29, Scotti reissued the remaining 100,000 shares for $15.50 per share. Scotti earned $420,000 of net income throughout the year and did not pay any dividends in its first year.

What is the balance in the Retained Earnings account on December 31, 2018? (Hint: Write down the entries for all the transactions since August 4th and keep track of the balance in the Paid-in Capital - Treasury Stock account).

Group of answer choices

Cannot be determined from the information given.

$470,000

$420,000

$0

$370,000

Answer 1

Date	Particulars	Debit	Credit
1/1/18	Cash	$ 14,400,000.00
	Common Stock		$   4,000,000.00
	APIC-Common Stock		$ 10,400,000.00
7/5/18	Treasury Stock	$   4,000,000.00
	Cash		$   4,000,000.00
8/4/18	Cash	$   1,250,000.00
	Treasury Stock		$   1,000,000.00
	APIC-Treasury Stock		$      250,000.00
9/15/18	Cash	$   1,150,000.00
	Treasury Stock		$   1,000,000.00
	APIC-Treasury Stock		$      150,000.00
12/29/18	Cash	$   1,550,000.00
	APIC-Treasury Stock	$      400,000.00
	Retained Earning	$         50,000.00
	Treasury Stock		$   2,000,000.00

Thus balance of retained earning

Opening retained earning	$                       -
Add: Income for the year	$      420,000.00
Less: Dividend	$                       -
Less: Reissue of treasury stock	$       (50,000.00)
Closing retained earning	$      370,000.00

Thus the answer would be $370,000

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