Wize University Introduction to Financial Accounting Textbook > Shareholders' Equity
Retiring Par-Value Shares
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Retiring Par-value Shares
When a company repurchases its shares in an effort to increase the market price of the remaining shares, the repurchased shares must be retired (cancelled).
Retiring Shares with a par Value
- Debit the shares account at par value
- Credit Cash for the market value of the shares
- Debit Contributed Surplus or Additional paid-in capital
Wize Concept
If the balance of Contributed surplus is less than the difference between the par-value and the market price of the shares, debit the rest from Retained earnings.
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Example: Retiring Par-Value Shares
Prepare the journal entry to record the following transaction that took place in September, 2021. The balance of contributed surplus on September 1st, 2021 is $1,400,000.
Sept. 14: ABC Inc repurchases 10,000 shares with a par-value of $0.01. The market value at the time of the repurchase is $37.
Practice: Retiring Par-value Shares
The following information is available for Corn 'N Cob Corp as at April 30th, 2024:
On May 17th, The company repurchased 20,000 shares when they were trading at a market value of $143 each.
Transactions:
| Account | Debit | Credit |
|---|---|---|