The balance sheet of Messi Services included the following shareholders' equity section at December 31, 2021: ($ in millions) Common stock ($1 par, authorized 200 million shares, issued and outstanding 180 million shares) $ 180
Paid-in capital—excess of par 1,080
Retained earnings 560
Total shareholders’ equity $ 1,820
On January 5, 2022, Messi purchased 2 million treasury shares for $9 million. Immediately after the purchase of the shares, the balances in the paid-in capital—excess of par and retained earnings accounts are:
Paid-in capital—excess of par
Retained earnings
a. $ 1,068 $ 556
b. $ 1,064 $ 560
c. $ 1,080 $ 560
d. $ 1,080 $ 544

a. $ 1,068 $ 556

Explanation:

Calculation for what the balances in the paid-in capital—excess of par and retained earnings accounts are:

Calculation for Paid up capital in excess of par

Paid up capital in excess of par=$1,080-[($1,080/180)*2million shares]

Paid up capital in excess of par=$1,080-($6 per share*2million shares)

Paid up capital in excess of par =$1,080-$12

Paid up capital in excess of par=$1,068

Calculation for the Retained Earnings

Retained Earnings=$560-$4

Retained Earnings=$556

Therefore the balances in the paid-in capital—excess of par and retained earnings accounts are:$ 1,068 and $ 556

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