Kellogg, Incorporated purchased 200 shares of its own $20 par value stock for $30 cash per share. Which of the following answers reflects how this purchase of treasury stock would affect Kellogg's financial statements?

Question

Quizplus · Accepted Answer

The purchase of treasury stock reduces the total equity of the company. As a result, the total assets remain the same, but both the total liabilities and the total equity decrease. In choice A, the total assets would decrease by $6,000 (200 shares x $30 per share), but the total liabilities and equity would remain unchanged, which is not correct. In choice B, the total assets and liabilities would increase by $6,000, which is incorrect. In choice C, the total assets remain the same, but both the total liabilities and equity decrease by $6,000 due to the purchase of treasury stock. This is the correct choice. In choice D, the total assets, liabilities, and equity all decrease by $6,000, which is incorrect.

Kellogg, Incorporated Purchased 200 Shares of Its Own $20 Par