How will Samsung’s stock buyback impact its assets, liabilities, and equity?

Source: Wikipedia

In late 2014, Samsung Electronics, the smartphone maker, announced that it would be buying back $2 billion of its own shares.  Specifically, it expects to buy back 1.65 million common shares and 250,000 preferred shares. Samsung is also expected to increase its dividend in 2015.

Questions

1. What is the impact on Samsung’s balance sheet (assets, liabilities, and equity) from the share buyback?
2. Once Samsung purchases back the shares, how will these shares be shown on its balance sheet?
3. Why would Samsung’s current shareholders support a share buyback?
4. Will dividends be paid on the shares that Samsung buys back? Why or why not?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

• Student handout (pdf) (word) (contains entire blog posting + discussion questions)
• PowerPoint file (brief article overview + discussion questions)

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