Answer:
The retained earnings will be decrease as the re-issued value is less than the cost at which they were acquired and it is debited.
Explanation:
Re-issuance of the stock:
A company has the ability to reissue shares of treasury stock as a way of raising capital for the company’s business activities.
As Sauder acquired 20,000 shares of its common stock at a price of $16 per share so
Formula for Amount:
Amount = Acquired no. of shares * cost
As Acquired no. of shares = 20000
Cost = $16
therefore by putting the values in the above formula, we get
Amount = 20000 * 16
Amount = $320,000
As these shares were reissued at a price of $12 per share so
Re issued no. of shares = 20000
Cost = $12
therefore by putting the values in the above formula, we get
Amount = 20000 * 12
Amount = $240,000
Now we need to analyze the condition of various accounts.
Cash Accounts:
Debit = $240,000
Retained Earning Account:
Debit = $320,000 - $240,000
Debit = $80,000
Treasury Stock Account:
Credit = $320,000
Effect on the re-issuance of the stock:
The retained earnings will be decrease as the re-issued value is less than the cost at which they were acquired and it is debited.
