A company issued shares of stock for $20,000 and later bought back all of the shares initially issued for $25,000. What is the net change of Owners’ Equity during the month (assuming no other transactions occurred affecting Owners’ Equity)?

Correct answer. When shares are issued, Owners’ Equity increases and the company receives cash, so Cash increases. When shares are repurchased, Owners’ Equity decreases and, since the company pays cash to buy back those shares, Cash decreases.