Solved: Babaloo corporation has 5000 shares of stock outstanding, Accounting Basics

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Babaloo corporation has 5000 shares of stock outstanding

Problem

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?
a. $60,000
b. $200,000
c. $280,000
d. $300,000
e. None of the above.

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Accounting Basics: Babaloo corporation has 5000 shares of stock outstanding

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