In January 2017 Crane Company a newly formed company issued

In January 2017, Crane Company, a newly formed company, issued 9500 shares of its $8 par common stock for $13 per share. On July 1, 2017, Crane Company reacquired 950 shares of its outstanding stock for $10 per share. The acquisition of these treasury shares

a. increased total stockholders\' equity.

b. decreased the number of issued shares.

c. decreased total stockholders\' equity.

d. did not change total stockholders\' equity.

Solution

The right answer is option (C) decreased total stockholders\' equity.

Justification:

Statement of stockholders equity at the time of Formation of company

Particulars

Per Share

Number of Shares

Total Amount ($)

Paid up Capital

8

9500

               76,000.00

Paid in capital in excess of par

5

9500

               47,500.00

Total Share holders equity

13

9500

            1,23,500.00

Statement of stockholders equity after requiring treasury shares

Particulars

Per Share

Number of Shares

Total Amount ($)

Paid up Capital

8

8550

(9500-950)

               68,400.00

Paid in capital in excess of par

5

8550

               42,750.00

Share holders equity before Treasury Shares

13

8550

            111,150.00

Treasury Shares

10

950

                  9,500.00

Total Share holders equity

9500

(8550+950)

            1,20,650.00

(9500+111,150)

Statement of stockholders equity at the time of Formation of company
Particulars	Per Share	Number of Shares	Total Amount ($)
Paid up Capital	8	9500	76,000.00
Paid in capital in excess of par	5	9500	47,500.00
Total Share holders equity	13	9500	1,23,500.00