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Management & Leadership Essay

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The Chen Scenario: Stock Transactions
ACC 291
February 6, 2014

The Chen Scenario: Stock Transactions
    For this assignment, I will provide the analysis of how the purchase & resale of 1,000 shares by Chen, Inc. affected net income, total assets, total paid-in capital, and total stockholders’ equity, when held in the treasury. The first segment will detail the purchase of the treasury stock. The second segment will detail the resale of the treasury stock.
    Chen Inc. is purchasing 1,000 shares of its own previously issued $5 per common stock for $12,000. This will create a debit of $12,000 to Treasury Stock and a credit of $12,000 to Cash. This purchase will not impact net income, but will indicate a decrease of $12,000 in total assets. Total paid-in capital is not affected. This produced a $12,000 decrease in total stockholders’ equity.
    Chen Inc. is no reselling the above referenced treasury stock for $15,000. This will created a credit of $12,000 to Treasury Stock and a debit to Cash in the amount of $15,000, as well. In addition, there will need to be a credit to Additional Paid-In Capital (Treasury Stock) in the amount of $3,000. Again, this resale does not impact net income, but will produce a $15,000 increase in total assets. This will also create an increase of $3,000 in total paid-in capital. Last, but not least, this will increase total stockholders’ equity by $15,000.

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