Exercise 15-7 oe Dumars Company has outstanding 40,000 shares of $5 par common s

Question

Exercise 15-7 oe Dumars Company has outstanding 40,000 shares of $5 par common stock which had been issued at $30 per share. Joe Dumars then entered into the following transactions 1. Purchased 5,000 treasury shares at $45 per share 2. Resold 2,000 of the treasury shares at $49 per share. 3. Resold 500 of the treasury shares at $40 per share. Indicate the effect each of the three transactions has on the financial statement categories listed in the table below, assuming Joe Dumars Company uses the cost method Stockholders' Paid-in Capital Retained Earnings Net Income # Assets Liabilities Equity 1. 2. 3.

Explanation / Answer

# Assets Liabilities Stockholders’ Equity Paid-in Capital Retained Earnings Net Income 1. Decrease No effect Decrease No effect No effect No effect 2. Increase No effect Increase Increase No effect No effect 3. Increase No effect Increase Decrease No effect No effect

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