Which of the following statements correctly describes a treasury stock transaction?
A)A treasury stock purchase for less than the amount of the stock's original issue cost results in a decrease in total stockholders' equity.
B)A treasury stock purchase for less than the amount of the stock's original issue cost results in an increase in total stockholders' equity.
C)A treasury stock purchase for an amount equal to the amount of the stock's original issue cost results in no change to total stockholders' equity.
D)A treasury stock purchase for more than the amount of the stock's original issue cost results in an increase in total stockholders' equity.

Question

Quizplus · Accepted Answer

When a company purchases its own stock as treasury stock for less than the original issue cost, it results in a decrease in total stockholders' equity because the company is spending less money to buy back its own stock than what it received when it originally issued the stock.

Which of the Following Statements Correctly Describes a Treasury Stock