Use the Following Information for Questions

question 155

Multiple Choice

Use the following information for questions.
When Oslo Ltd. was organized last year, they issued 100,000 no par value common shares for $ 1,200,000. Earlier this year, the corporation purchased 4,000 of these shares at $ 15 per share, to be held in the treasury, and three months later, sold 2,000 treasury shares at $ 19 per share. There were no other treasury share transactions.
-If, instead of holding the 4,000 shares as treasury shares, Oslo had decided to cancel them, Oslo should debit

• A) Common Shares for $ 48,000 and Retained Earnings for $ 12,000.
• B) Contributed Surplus for $ 48,000 and Retained Earnings for $ 12,000.
• C) Contributed Surplus for $ 60,000.
• D) Common Shares for $ 60,000.

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Definitions:

Gratification

The satisfaction or pleasure one feels when their needs or desires are fulfilled.

Reality Principle

A psychoanalytic concept where the ego seeks to satisfy the id’s desires in realistic and socially acceptable ways.

Operate

To function or perform effectively, often referring to machinery or procedures, but also can apply to individuals and organizations.

Ego

In psychoanalytic theory, the part of the personality that mediates between the demands of the id, the superego, and reality.