Assume Dubello Company uses the cost method for any treasury stock transactions.
Dubello Company has the following information about it’s common stock on January 1 of the current year:
Common Stock, $4 par; 200,000 shares authorized, 80,000 shares issued
- On January 2, Dubello purchases 4,000 shares of it’s own stock for $30 per share.
- On January 3, Dubello declares a cash dividend on common stock of 50 cents per share.
1. What is the balance in the common stock account after the purchases on January 2?
2. By what amount will retained earnings decrease on January 3 as a result of the dividend?