In 2018, Brock Lee Vegetables, Issued $1 Par Value Common

question 119

Multiple Choice

In 2018, Brock Lee Vegetables, issued $1 par value common stock for $30 per share. No other common stock transactions occurred until March 31, 2020, when Brock Lee acquired some of the issued shares for $25 per share and retired them. Which of the following statements is true for this acquisition and retirement?

• A) 2020 net income is decreased.
• B) 2020 net income is increased.
• C) Additional paid-in capital is increased.
• D) Retained earnings is increased.

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Definitions:

Interest

is the cost of borrowing money or the payment made by a bank or financial institution to an account holder for the use of their funds.

Preferred Stock

A class of ownership in a corporation with a higher claim on assets and earnings than common stock, usually with fixed dividends.

Quarterly Dividend

A dividend payment made by a company to its shareholders every three months, representing a portion of the earnings.

Compounded Quarterly

A method of calculating interest where the interest earned on an investment is calculated four times a year and added to the principal sum, leading to interest calculations on interest in subsequent periods.