A corporation repurchases 2,000 of its common shares initially issued for $10 per share for $12 per share.This transaction will:

Question

Quizplus · Accepted Answer

When a corporation repurchases its common shares, the number of common shares outstanding and the total shareholders' equity decrease. In this case, the corporation repurchased 2,000 common shares at a price of $12 per share, meaning it spent $24,000 ($12 * 2,000). Since the shares were initially issued for $10 per share, the repurchase results in a decrease of $4,000 ($2 increase in price * 2,000 shares) in retained earnings, which is a component of total shareholders' equity. Therefore, the correct answer is C.

A Corporation Repurchases 2,000 of Its Common Shares Initially Issued