A corporation purchases 15,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?
A) Increase by $525,000.
B) Decrease by $300,000.
C) Decrease by $525,000.
D) Decrease by $225,000.

Question

Quizplus · Accepted Answer

When a corporation purchases its own stock, it is recorded as treasury stock at cost, which reduces total stockholders' equity by the cost of the purchase. The cost is 15,000 shares x $35 per share = $525,000.

A Corporation Purchases 15,000 Shares of Its Own $20 Par