Use the Following Information for Questions

question 6

Multiple Choice

Use the following information for questions.
Galba Corp.'s shareholders' equity at January 1, 2020 was:
Common shares, no par value; authorized 200,000 shares; During 2020, Galba had the following share transactions:
Acquired 2,000 treasury shares for $ 30,000
Sold 1,200 treasury shares at $ 19 a share
Retired the remaining treasury shares
No other share transactions occurred during 2020.
-Instead, assume Galba cancelled the 2,000 shares when it acquired them for $ 30,000. The journal entry to record the retirement would be

• A) Dr. Common Shares, $ 30,000; Cr. Cash, $ 30,000.
• B) Dr. Treasury Shares, $ 30,000; Cr. Cash, $ 30,000.
• C) Dr. Common Shares, $ 28,000; Dr. Contributed Surplus, $ 2,000; Cr. Cash, $ 30,000.
• D) Dr. Common Shares, $ 28,000; Dr. Retained Earnings, $ 2,000; Cr. Cash, $ 30,000.

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Definitions:

Limited Warranty

A warranty with certain conditions and limitations on the parts, time, type of defect, or other factors warrantied.

Warranty

An assurance, either express or implied, by one party that the other party can rely on its representations of fact; in sales, a binding promise regarding a product in the event that the product does not meet the manufacturer’s or seller’s promises.

Written Warranty

A documented guarantee provided by a manufacturer or seller, detailing the conditions under which a product can be returned, replaced, or repaired.

Magnuson-Moss Act

A federal law that governs warranties on consumer products to protect buyers from deceptive warranty practices.