Treasury stock that was purchased for $2,500 is sold for $3,000. As a result of these two transactions combined, a. stockholders' equity will not change, because the amount of authorized stock has not changed. b. stockholders' equity will be increased by $500. c. income will be increased by $500. d. stockholders' equity will be increased by $3,000.

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Business

Gloria Lara

19 July, 07:17

Treasury stock that was purchased for $2,500 is sold for $3,000. As a result of these two transactions combined, a. stockholders' equity will not change, because the amount of authorized stock has not changed. b. stockholders' equity will be increased by $500. c. income will be increased by $500. d. stockholders' equity will be increased by $3,000.

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Answers (1)

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Maria Ward · Answer 1

Correct option is (b)

Explanation:

Treasury stock refers to the stock that is bought back by the organization to reduce the number of shares held by investors.

Purchase of treasury stock will not increase or decrease stockholder's equity, but if treasury stock is sold and gain is realized in the transaction, then such income will increase stockholder's equity by that amount.

here, treasury stock was purchased for $2,500 and sold for $3,000. Resultant income of $500 (3,000 - 2,500) will increase stockholder's equity by $500.