On January 1, 2019, Cocker reacquired 8,000 of the outstanding shares of its own common stock for $34 per share.None of these shares belonged to Popper.How would this transaction have affected the additional paid-in capital of the parent company?
A) $0.
B) Decrease it by $32,900.
C) Decrease it by $45,700.
D) Decrease it by $23,100.
E) Decrease it by $50,500.

Question

Quizplus · Accepted Answer

The repurchase of shares would decrease the parent company's additional paid-in capital by the difference between the amount paid per share and the par value per share, multiplied by the number of shares repurchased.
In this case, the par value of the common stock is not given, so it must be assumed to be $1 per share (a common value for par value). Therefore, the total par value of the 8,000 shares repurchased is $8,000 (8,000 shares x $1 per share).
The amount paid for the shares was $34 per share, for a total of $272,000 (8,000 shares x $34 per share).
Thus, the decrease in additional paid-in capital would be $272,000 - $8,000 = $264,000, or $23,100 per the 9,000 outstanding shares prior to the repurchase (since the 8,000 shares repurchased represent 89% of the outstanding shares, the decrease in additional paid-in capital would be approximately 89% of the total amount).

On January 1, 2019, Cocker Reacquired 8,000 of the Outstanding