In 2007, Winn, Inc. issued $1 par value common stock for $35 per share. No other common stock transactions occurred until July 31, 2009, when Winn acquired some of the issued shares for $30 per share and retired them. Which of the following statements correctly states an effect of this acquisition and retirement?
A)2009 net income is decreased.
B)Additional paid-in capital is decreased.
C)2009 net income is increased.
D)Retained earnings is increased.The entries to record the stock issuance and subsequent acquisition and retirement (per share) are as follows:
The net result is a decrease in additional paid-in capital of $29 per share retired.

Question

Quizplus · Accepted Answer

The acquisition and retirement of common stock will decrease the additional paid-in capital account. None of the other answer choices are correct as net income and retained earnings are not affected by this transaction.