Question

Joe 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.

#
 

Assets
 

Liabilities
 
Stockholders’
Equity
 
Paid-in
Capital
 
Retained
Earnings
 
Net
Income
1.
  select an effect on a financial statement categoryIncreaseDecreaseNo effect DecreaseIncreaseNo effect   select an effect on a financial statement categoryIncreaseDecreaseNo effect DecreaseIncreaseNo effect   select an effect on a financial statement categoryNo effectIncreaseDecrease DecreaseIncreaseNo effect   select an effect on a financial statement categoryNo effectIncreaseDecrease DecreaseIncreaseNo effect   select an effect on a financial statement categoryIncreaseDecreaseNo effect DecreaseIncreaseNo effect   select an effect on a financial statement categoryIncreaseDecreaseNo effect DecreaseIncreaseNo effect
2.
  select an effect on a financial statement categoryDecreaseIncreaseNo effect DecreaseIncreaseNo effect   select an effect on a financial statement categoryDecreaseNo effectIncrease DecreaseIncreaseNo effect   select an effect on a financial statement categoryNo effectIncreaseDecrease DecreaseIncreaseNo effect   select an effect on a financial statement categoryDecreaseNo effectIncrease DecreaseIncreaseNo effect   select an effect on a financial statement categoryDecreaseNo effectIncrease DecreaseIncreaseNo effect   select an effect on a financial statement categoryIncreaseDecreaseNo effect DecreaseIncreaseNo effect
3.
  select an effect on a financial statement categoryIncreaseNo effectDecrease DecreaseIncreaseNo effect   select an effect on a financial statement categoryNo effectDecreaseIncrease DecreaseIncreaseNo effect   select an effect on a financial statement categoryDecreaseIncreaseNo effect DecreaseIncreaseNo effect   select an effect on a financial statement categoryIncreaseDecreaseNo effect DecreaseIncreaseNo effect   select an effect on a financial statement categoryNo effectIncreaseDecrease DecreaseIncreaseNo effect   select an effect on a financial statement categoryNo effectIncreaseDecrease DecreaseIncreaseNo effect
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