A corporation purchases 20,000 shares of its own $10 par ordinary shares for $25 per share, recording it at cost.What will be the effect on total equity?

Question

Quizplus · Accepted Answer

When a corporation purchases its own shares, it is recorded as treasury stock, which reduces total equity by the cost of the shares purchased. In this case, 20,000 shares at $25 per share results in a $500,000 decrease in total equity.

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