Answered

IDNLearn.com: Your go-to resource for finding precise and accurate answers. Our experts provide timely and accurate responses to help you navigate any topic or issue with confidence.

A company purchased treasury stock for $20,800. The treasury stock was initially issued for $16,500 and had a $6,800 par value. Which of the following statements correctly describes the effects of the treasury stock purchase?A. Stockholders' equity increases $16,500.B. Net income decreases by $9,700.C. Stockholders' equity decreases $20,800.D. Net income increases by $9,700.

Sagot :

Anthougoidn

Answer:

The statement that correctly describes the effects of the treasury stock purchase by the company is:

C. Stockholders' equity decreases $20,800.

Explanation:

A treasury stock purchase decreases stockholders' equity because a treasury stock represents a contra account to the stockholders' equity.  When the value of the treasury stock is increased through a purchase, the treasury stock account increases while the common stockholders' equity decreases by the amount paid for the purchase.

Thank you for being part of this discussion. Keep exploring, asking questions, and sharing your insights with the community. Together, we can find the best solutions. Find precise solutions at IDNLearn.com. Thank you for trusting us with your queries, and we hope to see you again.