Rock Bottom Gold Company recently repurchased 7 million shares of its common sto

Question

Rock Bottom Gold Company recently repurchased 7 million shares of its common stock for $47 per share. The intent of the repurchase was to increase earnings per share to be more in line with competitors.  

Required:

1. Determine the impact of the stock repurchase on assets, liabilities, and stockholders' equity. (Enter your answers in whole dollars not in millions (i.e., 1,000,000 not 1.0). Negative amounts should be indicated by a minus sign.)

2. Prepare the journal entry to record the repurchase. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars not in millions (i.e., 1,000,000 not 1.0).)

Explanation / Answer

1.the following table shows the impact of stock repurchase on assets, liabilities and stockholders' equity:

2.the following will be the journal entry.

1.assets reduced by the amount expended on stock repurchase, in this case it is (7 million shares * $47 per share) =>$329 million - $329 ,000,000 2.Liabilities un affected, since a repurchase is made with cash, the liabilties remain unaffected nil 3.Share holder's equity the shares repurchased are termed as treasury stock which are shown as a deduction to share holder's equity account , in this the to -$329,000,000

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