There are a number of reasons why companies will buy back sh

There are a number of reasons why companies will buy back shares of their own stock, Disney Inc. bought back 74 million shares paying $7.5 billion dollars during its 2016 accounting year. How was Disney Inc.\'s ba impacted by the common stock buy back? (OA-Operating activity, FA- Financing activity) A. Statement of Cash Liabilities Stockholders\' Equity - ExpenseNet Income Additional Paid-Retained Cash - Notes payable + - Treasury stock in Capital? ($7.5 billion) ($7.5 billion) + ($7.5 billion) FA Statement of Cash - ExpenseNet Income Additional Paid-Retained Cash - Notes payable + - Treasury stock in Capital? ?(S7.5 billion ($7.5 billion) ($7.5 billion) FA Statement of Cash - ExpenseNet Income Additional Paid-Retained Cash - Notes payable + -Treasury stock in Capital? ($7.5 billion) + (S7.5 billion) ($7.5 billion ($7.5 billion) (S7.5 billion) OA Statement of Cash - ExpenseNet Income Additional Paid- Retained Cash - Notes payable + - Treasury stock in Capital? Stock ($7.5 billion) - ($7.5 billion) ($7.5 billion) FA

Solution

Answer

Treasury Stock a/c is debited, and
Cash a/c is credited by the amount of cash paid to buy back those shares.

Cash will be decreased by $7.5 billion
Treasury Stock of $ 7.5 billion will be deducted from Equity section.
This transaction does not affect Income statement, hence no effect on revenues, expenses or Net Income.
Since Cash is being paid, it’s a Cash Outflow (hence shown within “( )” under Statement of Cash Flows). This will be a part of Cash flows from Financing Activities (FA).