acc 291 Week 3 Discussion 3

         Chen, Inc. purchases 1,000 shares of its own previously issued $5 per common stock for $12,000. Assuming the shares are held in the treasury, what effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (d) total stockholders’ equity?

ACC291 Week 3 Discussion 3

• Chen, Inc. purchases 1,000 shares of its own previously issued $5 per common stock for $12,000. Assuming the shares are held in the treasury, what effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (d) total stockholders’ equity? • The treasury stock purchased in the above question was resold by Chen, Inc. for $15,000. What effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (d) total stockholders’ equity? To begin to answer these questions, it would be important to know what treasury stocks are and what holding them in the treasury means. On page 520 of the text it tells that “Treasury stock is a corporation’s own stock that it has issued and subsequently reacquired from shareholders, but not retired” (Kimmel, Weygandt, & Kieso, 2011). Extra reading and searching the Internet can give some clearer answers than the text. This website gave good explanations for...

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