The cost of treasury stock is deducted from total paid-in capital and retained earnings in determining total stockholders' equity.

Question

Quizplus · Accepted Answer

When a company buys back its own shares, the cost of treasury stock is recorded as a deduction from total paid-in capital and retained earnings in the stockholders' equity section of the balance sheet. This is because the company is essentially reducing the number of outstanding shares, which increases the value of each remaining share. Therefore, the total stockholders' equity is decreased by the cost of the treasury stock.

The Cost of Treasury Stock Is Deducted from Total Paid-In