Crossroads Mall had 100,000 outstanding shares of common stock.On June 16,2015,Crossroads repurchased 20,000 shares of its own stock at $30 per share.On July 23,2015,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

When Crossroads repurchased its own stock, it decreased its assets by $30 per share x 20,000 shares = $600,000. The stockholders’ equity decreased because the number of outstanding shares reduced by 20,000. Therefore, the resale of 10,000 shares at a lower price of $28 per share has decreased the value of the assets by an additional $280,000, while making no impact on stockholders' equity. Overall, the repurchase and resale of common stock have decreased both assets and stockholders' equity, thus resulting in a decrease in the accounting equation.

Crossroads Mall Had 100,000 Outstanding Shares of Common Stock