| How does Apple’s stock buyback impact its financial statements?Accounting in the Headlines

In May of 2024, Apple announced a share buyback authorization of $110 billion, which is the largest in share repurchase authorization in U.S. history. Apple may not buy back the full $110 billion of its stock; the board’s authorization is simply the maximum amount of stock that can be repurchased. However, based on Apple’s history, investors are optimistic that most of this budget will be used. This optimism from investors also resulted a same-day gain of 6% for AAPL stock.

View a quick tutorial video about treasury stock (stock buybacks) at this link and then answer the following questions.

Discussion Questions

1. Assume that Apple repurchases $10 million of its stock with cash. How will Apple’s assets be impacted by this purchase?
2. Assume that Apple repurchases $10 million of its stock with cash. How will Apple’s stockholders’ equity be impacted by this purchase?
3. Which of Apple’s financial statements will be impacted by its stock buyback?
4. Assume that a company has 1,500,000 shares authorized and 1,000,000 shares issued. How many shares will it have outstanding if it has repurchased 250,000 shares?
5. What are some reasons that Apple may want to buy back its own stock?