Question

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

Answer 1

Answer:

The entry to record the purchase of the treasury stock is:

Debit Treasury Stock 12,000

Credit Cash 12,000

Step-by-step explanation:

(a) no effect on net income

(b) 12,000 decrease in total assets

(c) no effect on total paid-in capital. Treasury stock reduces retained earnings.

(d) 12,000 decrease in total stockholders' equity