Babaloo Corporation has 5,000 shares of stock outstanding. Desi owns 2,000. The rest are owned by unrelated individuals. Babaloo redeems 1,000 shares for $300,000 at a time when it has paid-in capital of $400,000 and E & P of $1.0 million. What would be the charge to Babaloo’s E & P as a result of the redemption?

1. $60,000

2. $200,000

3. $280,000

4. $300,000

5. None of the above

Answer rating: 100% (QA)

Before redemption 5000 shares are outstanding EP before redemp... View the full answer