Amber Corporation purchases 40,000 shares of its own $10 par value common stock for $30 per share.What will be the effect on stockholders' equity?

Question

Quizplus · Accepted Answer

When a corporation purchases its own stock, it is recorded as treasury stock, which reduces stockholders' equity by the cost of the shares purchased. In this case, 40,000 shares at $30 per share results in a decrease of $1,200,000 in stockholders' equity.

Amber Corporation Purchases 40,000 Shares of Its Own $10 Par