A corporation purchases 30,000 shares of its own $15 par common stock for $30 per share, recording it at cost. What will be the effect on total stockholders' equity?

Question

Quizplus · Accepted Answer

When a corporation purchases its own stock, it is recorded as treasury stock, which reduces total stockholders' equity by the cost of the purchase. Here, 30,000 shares at $30 per share results in a $900,000 decrease in stockholders' equity.

A Corporation Purchases 30,000 Shares of Its Own $15 Par