Question

Assume Alpha reacquires share of their own Common Stock to hold in the Treasury. They pay $ 30.00 per share.

With this purchase, the impact on Total Paid-in Capital and the total Shareholders' Equity, respectively, will be:
a. increase/increase
b. decrease/decrease
c. increase/decrease
d. none/decrease

Answer 1

d. none/decrease

Step-by-step explanation:

There is no impact in Total Paid-in Capital account because if the shares are repurchased and keeped in Treasury stock the entry is as follows:

Treasury Stock - DEBIT

Cash - CREDIT

The Treasury account it's reported on the balance sheet statement under the stockholder's equity section as a contra- equity accounts that means that the balance of this account decreases the total value of this section.

If the company decides to retire the share of the market, then it's necessary to deduct it of Common Stock and Paid in Capital account and the Treasury account will have zero balance in the balance sheet.