Amber Corporation purchases 50,000 shares of its own $10 par value common stock for $50 per share. What will be the effect on stockholders' equity?

Question

Quizplus · Accepted Answer

When a corporation purchases its own stock, it is recorded as treasury stock, which reduces stockholders' equity by the cost of the shares purchased. In this case, 50,000 shares at $50 per share results in a $2,500,000 decrease in stockholders' equity.

Amber Corporation Purchases 50,000 Shares of Its Own $10 Par