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Exercise 20-3 (Static) Change from the treasury stock method to retired stock [LO20-2] In keeping...

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Accounting

Exercise 20-3 (Static) Change from the treasury stock method to retired stock [LO20-2]

In keeping with a modernization of corporate statutes in its home state, UMC Corporation decided in 2021 to discontinue accounting for reacquired shares as treasury stock. Instead, shares repurchased will be viewed as having been retired, reassuming the status of unissued shares. As part of the change, treasury shares held were reclassified as retired stock. At December 31, 2020, UMCs balance sheet reported the following shareholders equity:

($ in millions)
Common stock, $1 par $ 200
Paid-in capitalexcess of par 800
Retained earnings 956
Treasury stock (4 million shares at cost) (25 )
Total shareholders equity $ 1,931

Required: Identify the type of accounting change this decision represents and prepare the journal entry to effect the reclassification of treasury shares as retired shares.

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