The purchase of treasury stock will result in
A) no net changes in assets,liabilities,or stockholders' equity.
B) a decrease in assets and a decrease in stockholders' equity.
C) an increase in assets and an increase in liabilities.
D) an increase in assets and an increase in stockholders' equity.

Question

Quizplus · Accepted Answer

Treasury stock represents shares that were previously issued by the company and have been repurchased. When the company buys its own shares back, it reduces the amount of outstanding shares and therefore reduces stockholders' equity. Since the company's assets are used to repurchase the stock, there is a decrease in assets as well. Therefore, the purchase of treasury stock will result in a decrease in assets and a decrease in stockholders' equity.

The Purchase of Treasury Stock Will Result in