When a corporation purchases its own stock and intends to reissue that stock at a later date, the cost of the shares is shown in the Assets section of the balance sheet until the stock is reissued.

Question

Quizplus · Accepted Answer

When a corporation purchases its own stock, the cost of the shares is recorded as a reduction in stockholders' equity, not as an asset on the balance sheet. This is because the repurchased shares, known as treasury stock, represent a return of capital to shareholders and reduce the company's equity.

When a Corporation Purchases Its Own Stock and Intends to Reissue