A corporation purchases 10,000 shares of its own $10 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?
A) increase, $100,000
B) increase, $350,000
C) decrease, $100,000
D) decrease, $350,000

Question

Quizplus · Accepted Answer

When a corporation purchases its own stock, it reduces the number of outstanding shares in the market, leading to a decrease in total stockholders' equity. Since the corporation purchases the stock for $35 per share while the par value is $10, the total cost is $350,000 (10,000 shares x $35 per share). Therefore, the effect on total stockholders' equity will be a decrease of $350,000.

A Corporation Purchases 10,000 Shares of Its Own $10 Par