On December 10, 2010, Smitty Corporation reacquired 2,000 shares of its own $5 par value common stock at a price of $60 per share. In 2011, 500 of the treasury shares are reissued at a price of $70 per share. Which of the following statements is correct?

Question

Quizplus · Accepted Answer

The treasury stock transactions result in a net reduction in stockholders' equity of $85,000. The purchase of 2,000 shares at $60 each reduces equity by $120,000. Reissuing 500 shares at $70 each increases equity by $35,000. The net effect is a reduction of $85,000.

On December 10, 2010, Smitty Corporation Reacquired 2,000 Shares of Its