Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 11 - Reporting and Analyzing Stockholders' Equity - Questions - Page 603: 10


The purchase of 1000 shares of its own previously issued 5 dollars par common shares will have the following effects: a) Net Income. b) Total Assets c) Total Paid-in capital d) Total stock holders' equity

Work Step by Step

a) There will be no change in the Net Income, as this has no effect from the number of shares. However earning per share will increase due to decrease in the number of shares. b) The total assets will decrease with the cost of Treasury stock purchased from the market. c) The original paid-in capital account, would not be affected because the number of issued shares does not change. d)Total stock holders' equity will be decreased with the cost of treasury stock which will be reduced from total paid-in capital.
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