Dempsey Company retires shares that it buys back. In its first share repurchase transaction, Dempsey purchased stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the stock on each of the following?
A) Option A
B) Option B
C) Option C
D) Option D

Question

Dempsey Company retires shares that it buys back. In its first share repurchase transaction, Dempsey purchased stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the stock on each of the following? 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Quizplus · Accepted Answer

Paid-in capital is reduced (debited) for the purchase price. Cash is credited for the amount paid to reacquire the stock. The (debit) plug is to retained earnings.

Dempsey Company Retires Shares That It Buys Back