A corporation purchases 10,000 shares of its own $10 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?
A) increase by $100,000
B) increase by $350,000
C) decrease by $100,000
D) decrease by $350,000

Question

Quizplus · Accepted Answer

When a corporation buys back its own shares, the cost of these shares is deducted from total stockholders' equity. In this case, 10,000 shares at $35 each cost $350,000, so stockholders' equity decreases by that amount.

A Corporation Purchases 10,000 Shares of Its Own $10 Par