The following is related to the shareholders’ equity of Adanac Limited on January 1: 

Common shares, 150,000 authorized, 14,000 shares issued ........................ $490,000 

Contributed surplus—reacquisition of common shares ...................................  12,000 

Retained earnings ....................................................................................................220,000 

During the year, the following transactions related to common shares occurred in the order listed: 

1. Reacquired 600 shares at $44 per share.  

2. Issued 3,600 shares at $47 per share. 

3. Issued 1,000 shares at $64.50 per share.

4. Reacquired 1,200 shares at $58 per share.

5. Reacquired 1,500 shares at $36 per share.

Instructions 

a. Calculate the number of shares authorized and issued at the end of the year. 

b. Determine the ending balances in each of the following accounts: Common Shares, Contributed Surplus—Reacquisition of Common Shares, and Retained Earnings.

One of the reasons a company might reacquire its own shares is to have shares available to fulfill employee stock compensation plans. What are some reasons a company would compensate employees with shares instead of cash bonuses?