When a corporation purchases treasury stock, the acquisition:

A. decreases the company's total assets and total stockholders' equity.

B. has no effect on total assets and total stockholders' equity.

C. requires that a gain or loss be recognized on the income statement.

D. increases the company's total assets and total stockholders' equity.

Question

Business

Carlen

22 August, 16:13

When a corporation purchases treasury stock, the acquisition:

A. decreases the company's total assets and total stockholders' equity.

B. has no effect on total assets and total stockholders' equity.

C. requires that a gain or loss be recognized on the income statement.

D. increases the company's total assets and total stockholders' equity.

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Answers (1)

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Dylan Hester · Answer 1

A. decreases the company's total assets and total stockholders' equity.

Explanation:

The journal entry will be: Treasury stock (Debit - Increased) 6,000 and Cash (Credit - Decreased) 6,000.

Treasury stock is a contra equity account that increases, decreasing Equity and Cash or another payment medium are assets that decrease, balancing the Accountable equation.