Treasury Stock

Treasury Stock

Write a response to the following scenario:

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?

Format your response consistent with APA guidelines.

Answer preview

Assuming the shares are held in the treasury, what effect does this transaction have on;

 (a) Net income

Treasury stock is repurchased shares. For this reason, there is no effect on the net income. When recording treasury stock, a contra –equity account is created through a debit……………

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