Please refer to the following information for Peartree Company: If Peartree purchases an additional 1,000 shares of treasury stock at $18 per share, which of the following statements would be TRUE?

Question

Please refer to the following information for Peartree Company:  If Peartree purchases an additional 1,000 shares of treasury stock at $18 per share, which of the following statements would be TRUE?

Quizplus · Accepted Answer

When Peartree purchases an additional 1,000 shares of treasury stock at $18 per share, it will decrease the cash balance by $18,000. However, since the shares are considered treasury stock, they are recorded as a reduction in the equity section of the balance sheet. Therefore, the total equity of the company would go down by $18,000.

Please Refer to the Following Information for Peartree Company