Question

Gabriel Company views share buybacks as treasury stock. In its first treasury stock transaction, Gabriel purchased treasury stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the treasury stock on each of the following? a) paid in capital decrease/ retained earnings decrease b) paid in capital decrease/ retained earnings no effeect c) paid in capital no effect/ retained earnings no effeect d) paid in capital no effect/ retained earnings decrease

Answer 1

Answer:

c) paid in capital no effect/ retained earnings no effect.

Explanation:

The purchase of the treasury stock has no effect on both paid in capital and retained earnings because Gabriel Company purchased the treasury stock for more than the price at which the stock was originally issued.

Since it's Gabriel's first purchase, they have no retained earnings yet.