Motorsports Company retires shares it buys back. In its first share repurchase transaction, Motorsports purchased stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the stock on each of the following?

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Motorsports Company retires shares it buys back. In its first share repurchase transaction, Motorsports purchased stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the stock on each of the following?

A) Retained earnings: decrease; Paid-in capital: decrease
B) Retained earnings: decrease; Paid-in capital: no effect
C) Retained earnings: no effect; Paid-in capital: no effect
D) Retained earnings: no effect; Paid-in capital: decrease

Answer: A

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