Crossroads Mall had 100,000 outstanding shares of common stock. On June 16, 2012, Crossroads repurchased 20,000 shares of its own stock at $30 per share. On July 23, 2012, Crossroads resold 10,000 shares at $28 per share. What net effect did the repurchase and the resell of common stock have on the accounting equation?

Question

Quizplus · Accepted Answer

The repurchase of shares decreases assets (cash) and decreases stockholders' equity (treasury stock). The resale of shares increases assets (cash) but decreases stockholders' equity because they were sold at a loss. Overall, both transactions result in a decrease in assets and stockholders' equity.

Crossroads Mall Had 100,000 Outstanding Shares of Common Stock