A corporation repurchases 1,000 of its common shares initially issued for $8 per share for $6 per share.This transaction will:

Question

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The repurchase of 1,000 common shares initially issued for $8 per share, at a price of $6 per share, will result in a decrease in common shares by $8,000 (1,000 shares x $8 decrease in value per share). This reduction in common shares will, in turn, decrease total shareholders' equity. Option A is inaccurate since the repurchase would decrease shareholders’ equity rather than increasing it. Option B is incorrect as it suggests that only the number of shares will decrease and not the value of shares repurchased. Option C is also incorrect since the repurchase will have an impact on the shareholders’ equity.

A Corporation Repurchases 1,000 of Its Common Shares Initially Issued