Please refer to the following information for Peartree Company: If Peartree resold 1,000 shares of treasury stock for $24 per share, which of the following statements would be TRUE?

Question

Please refer to the following information for Peartree Company:  If Peartree resold 1,000 shares of treasury stock for $24 per share, which of the following statements would be TRUE?

Quizplus · Accepted Answer

When Peartree resells treasury stock, it receives cash for the shares sold. This increases the company's cash account by $24,000 (1,000 shares x $24 per share). At the same time, the company's treasury stock account decreases by the same $24,000. Since treasury stock is a contra-equity account (a negative account), reducing it by $24,000 actually increases the company's total equity by the same amount. Therefore, the total equity of the company would go up by $24,000.

Please Refer to the Following Information for Peartree Company