In keeping with a modernization of corporate statutes in its home state, UMC Corporation decided in 2018

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In keeping with a modernization of corporate statutes in its home state, UMC Corporation decided in 2018 to discontinue accounting for reacquired shares as treasury stock. Instead, shares repurchased will be viewed as having been retired, reassuming the status of unissued shares. As part of the change, treasury shares held were reclassified as retired stock. At December 31, 2017, UMC's balance sheet reported the following shareholders' equity:
..............................................................($ in millions)
Common stock, $1 par ...........................................$ 200
Paid-in capital-excess of par ....................................800
Retained earnings ...................................................956
Treasury stock (4 million shares at cost) ........................(25)
Total shareholders' equity .....................................$1,931
Required:
Identify the type of accounting change this decision represents, and prepare the journal entry to effect the reclassification of treasury shares as retired shares.
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Intermediate Accounting

ISBN: 9781259722660

9th Edition

Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas

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