Answer:
Agee’s total paid-in capital will decline by $17 million.
Explanation:
Stock Repurchase is a method to reduce the outstanding shares and equity value of the company in the market, company pays the stockholder and purchases own shares, which can be reissued or cancelled later on.
Common stock value = 40 million shares x $1 per share = $40 million
Additional Paid-in-Capital = 40 million shares x ( $15-$1)per share = $560 million
Stock was repurchased and recorded as follow
Dr. Treasury Shares $18 million
Cr. Cash $18 million
Retirement of Shares will reduce the values as follow
Common stock value = 1 million shares x $1 per share = $1 million
Additional Paid-in-Capital = 1 million shares x ( $18-$1)per share = $17 million
Journal Entry on retirement of shares
Dr. Common stock $1 million
Dr. Paid-In-Capital $17 million
Cr. Treasury Shares $18 million
The paid in capital will reduce by $17 million
