The entry to record the purchase of treasury stock will cause total stockholders' equity to decrease by the amount of the cost of the treasury shares.

Question

Quizplus · Accepted Answer

When a company buys back its own stock and holds it as treasury stock, this reduces the total number of outstanding shares. As a result, the company's total stockholders' equity will decrease by the cost of the treasury shares, since these shares are no longer considered to be outstanding. Therefore, the entry to record the purchase of treasury stock will cause total stockholders' equity to decrease by the amount of the cost of the treasury shares.

The Entry to Record the Purchase of Treasury Stock Will