During the year, Trenton Company purchased 3,000 shares of its $10 par common stock at $50 per share and later sold it for $40 per share. How much did total stockholders' equity change because of these treasury stock transactions?

Question

Quizplus · Accepted Answer

When a company purchases its own stock, it is recorded as Treasury Stock, which is subtracted from Stockholders' Equity. In this case, Trenton Company spent $150,000 (3,000 shares x $50 per share) to purchase the treasury stock, which decreased its Stockholders' Equity by the same amount. When the company later sold the treasury stock for $120,000 (3,000 shares x $40 per share), it realized a loss of $30,000, which further decreased its Stockholders' Equity. Therefore, the total change in Stockholders' Equity due to these transactions is a decrease of $30,000. Therefore, the correct answer is C.

During the Year, Trenton Company Purchased 3,000 Shares of Its