If the Board of Directors decides to repurchase the own shares at the time of redemption, they will be cancelled and will no longer be deemed issued. In this case, the common shares and additional paid-up capital accounts will be reduced (debited) by the amounts recorded in these accounts at the time of the initial issuance of the shares, and the cash will be reduced (credited) by the amount paid for the redemption of the shares. If the redemption price is higher than the original issue price, the difference is a reduction (charge) of the additional paid-up capital – own share account until its balance reaches zero. Once the balance of the capital equity account additionally reaches zero, or if there is no such account, the difference is a reduction (charge) of retained earnings. If the redemption price is lower than the original sale price, the difference (credited) to the deposited additional capital account increases. (_) A distribution of stock options to current employees as incentive compensation. Own shares are the issued shares of the company that have been repurchased by shareholders. Since a corporation cannot be its own shareholder, shares acquired by the corporation are not considered assets of the corporation. Assuming that the Company plans to reissue the shares in the future, the shares are held in the portfolio and reported as a reduction in equity on the balance sheet.

Own shares have no voting rights, receive no dividends or no liquidation value. Companies buy own shares when shares are needed for employee compensation plans or to acquire another company, and to reduce the number of shares outstanding, as the shares are considered a good buy. Buying own shares can boost trading and increase earnings per share without changing net income. True or false: When investors buy shares of a company, it is recorded by the company as an investment in securities. Which of the following characteristics are own actions? A corporation that has equity accounts called “common shares” and “retained earnings” is a corporation that frequently uses the services of outside persons, businesses and corporations. The cost of these services can be paid in the form of shares of the company. When a company reduces its outstanding shares by exchanging 1 share for 10 shares, it is called (n) True or false: own shares represent investments in the U.S. government`s own securities.

What type of shares typically have a high par value and a percentage of the dividend at par value? Originally, a corporation issues common shares at par value at an amount greater than par value. Thereafter, the Company acquires the shares for a price higher than the issue price and withdraws the shares immediately. The company has no previous transactions for share buybacks. Which of the following accounts would be reduced for share redemption and redemption? (Select all that apply.) Preferred shareholders generally have preferred shareholders versus common shareholders in respect of which elements? (Select all that apply.) As another example, suppose a corporation issues 100 preferred shares with a par value of $40 per share in exchange for legal services received from the corporation as a corporation. The lawyer had previously accepted a price of $5,000 for these legal services, but had chosen to accept shares rather than cash. In this example, the correct entry is: (_) Reduce undistributed earnings to par; Increase the par value of common shares. Reason: When investors buy shares of a company, the company records the transaction as paid-up capital. The par value gives no indication of the market value of the share. The shares with a par value of $5 were traded (sold) on the market for over $600, and many preferred shares with a par value of $100 were traded at a price well below par. The par value is not even a reliable indicator of the price at which shares can be issued. New companies can issue shares at prices well above or below par if state law allows it. The par value gives the accountant a constant amount at which he can record share capital issuances in share capital accounts.

As mentioned above, the total par value of all issued shares is usually the statutory capital of the company. (_) Reduction of the additional paid-up capital account for the new class of shares. This section shows how stock market transactions are accounted for.