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 buys back its own shares, it reduces stockholders' equity by the cost of the shares purchased. In this case, 30,000 shares at $30 each equals $900,000, so stockholders' equity decreases by $900,000.

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