Bob Smith, The accountant of ABC Ltd. has been tasked with redeeming part of the shares outstanding for his corporation. Bob is unsure how he should charge the cost of the redemption to shareholder's equity accounts. Required: Explain to Bob how the cost should be charged to shareholder’s equity accounts. Please provide specific responses for the following circumstances: 1) When the cost is lower than the average price per share. 2) When the cost is higher than the average price per share.
Bob Smith, The accountant of ABC Ltd. has been tasked with redeeming part of the shares outstanding for his corporation. Bob is unsure how he should charge the cost of the redemption to shareholder's equity accounts. Required: Explain to Bob how the cost should be charged to shareholder’s equity accounts. Please provide specific responses for the following circumstances: 1) When the cost is lower than the average price per share. 2) When the cost is higher than the average price per share.
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter9: The Cost Of Capital
Section: Chapter Questions
Problem 4MC: d. (1) What are the two primary ways companies raise common equity? (2) Why is there a cost...
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Bob Smith, The accountant of ABC Ltd. has been tasked with redeeming part of the shares outstanding for his corporation. Bob is unsure how he should charge the cost of the redemption to shareholder's equity accounts.
Required:
Explain to Bob how the cost should be charged to shareholder’s equity accounts. Please provide specific responses for the following circumstances:
1) When the cost is lower than the average price per share.
2) When the cost is higher than the average price per share.
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