Smith Corporation purchases 10,000 shares of its own $20 par value common stock for $30 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 purchase. In this case, 10,000 shares are purchased at $30 per share, resulting in a $300,000 decrease in stockholders' equity.

Smith Corporation Purchases 10,000 Shares of Its Own $20 Par