Question
The Kansas-Kentucky Corporation is started on January 1, Year One. The company issues 100,000 shares of its $1 par value common stock for $8 per
The Kansas-Kentucky Corporation is started on January 1, Year One. The company issues 100,000 shares of its $1 par value common stock for $8 per share. Subsequently, the company reports net income of $40,000 each year and pays an annual cash dividend of $10,000. In Year Three, the company reacquires 10,000 of these shares for $15 each. The cost method is to be applied to the treasury stock. Several weeks later, the company reis- sues 1,000 shares of this stock for $17 per share. A few days later, another 2,000 shares are reissued for $12 per share. At the end of Year Three, what should the company report as its retained earnings?
a. $84,000 b. $86,000 c. $88,000 d. $90,000
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