A company repurchased shares of its common stock for $19,000.The stock was initially issued for $12,000 and had a $5,000 par value.Which of the following statements correctly describes the effects of the repurchase of company's common stock shares?

A) Net income increases by $7,000.
B) Net income decreases by $7,000.
C) Stockholders' equity increases $12,000.
D) Stockholders' equity decreases $19,000.

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Lasia Alvarez · Accepted Answer

Final Answer : D, Explanation :  The repurchase of the company's common stock shares reduces the stockholders' equity by the amount paid to buy back the shares, which in this case is $19,000. Therefore, option D is the correct choice. Option A and B are incorrect because the repurchase of shares does not have a direct impact on net income. Option C is incorrect because issuing shares and repurchasing shares both affect stockholders' equity but in opposite ways. Issuing shares increase stockholders' equity, whereas repurchasing shares decreases stockholders' equity.

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