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25 January, 10:23

On December 2, Coley Corp. acquired 1,000 shares of its $2 par value common stock for $27 each On December 20, Coley Corp. resold 400 shares for $30 each. Which of the following is correct regarding the effect of the reselling of shares on the accounting equation?

A. Assets decrease

B. Liabilities decrease

C. Expenses increase

D. Stockholders' Equity increases

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  1. 25 January, 11:34
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    D. Stockholders' Equity increases

    Explanation:

    Cost of the share being resale = 400 shares x $27 = $10,800

    Proceeds on the resale of shares = 400 shares x $30 = $12,000

    Profit / Gain on resale = $12,000 - $10,800 = $1,200

    As there is a profit of $1,200 the stockholders equity will be increased on the reselling of share.

    As the assets section is increased because more cash is received against the cost of those shares.
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