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otez555 [7]
2 years ago
11

Emma, Inc. reacquired 166,326 of its shares at $22 per share as treasury stock. Last year, for the first time, Emma sold 37,992

treasury shares at $27 per share. By what amount will Emma's retained earnings decline if it now sells 48,987 treasury shares at $15 per share
Business
1 answer:
Lesechka [4]2 years ago
6 0

Answer:

The correct answer is $152,949.

Explanation:

According to the scenario, the given data are as follows:

Reacquired shares = 166,326

Per share price = $22

So, we can calculate the retained earning decline by using following formula:

Retained earning decline = Cost of Treasury shares - Sales price - Paid in Capital from stock

Where, Cost of treasury shares = 48,987 × $22 = $1,077,714

Now Sales Price = 48,987 × $15 = $734,805

and Paid in Capital from stock = 37,992 × ( $27 - $22) = $189,960

By putting the value in the formula, we get:

Retained earning decline = $1,077,714 - $734,805 - $189,960

= $152,949

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Explanation:

From the question, we are told that a company wants to determine its reorder point (R) and that demand is variable and they want to build a safety stock into R. We have also been given the information that the company wants to have a service level of 95 percent and that average daily demand is 8, lead time is 3 days and the standard deviation of demand during lead time is 2.

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