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Horton Industries’ shareholders’ equity included 130 million shares of $1 par common stock and a balance...

Horton Industries’ shareholders’ equity included 130 million shares of $1 par common stock and a balance in paid-in capital—excess of par of $1,300 million.

Assuming that Horton retires shares it reacquires (restores their status to that of authorized but unissued shares), by what amount will Horton’s total paid-in capital decline if it reacquires 2 million shares at $9.50 per share? (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

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Answer #1

Solution:

Common stock will decrease by = 2 millions* $1 = $2 millions

Paid in capital in excess of par decrease by = $1300 millions*2 millions shares / 130 millions shares

= $1300*2/130 = $20 millions

Decline in total paid in capital = $2 millions + $20 millions = $22 millions

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