Assume that a company paid $6 per share to purchase 1,100 shares of its $3 par common stock as treasury stock. The purchase of treasury stock increased total equity by $3,300. decreased total equity by $3,300. decreased total equity by $6,600. increased total equity by $6,600.

Assume that a company paid $6 per share to purchase 1,100 shares of its $3 par common stock as treasury stock. The purchase of treasury stock increased total equity by $3,300. decreased total equity by $3,300. decreased total equity by $6,600. increased total equity by $6,600.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter10: Stockholder's Equity

Section: Chapter Questions

Problem 12MCQ

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Concept explainers

Stockholder's Equity

The stockholders’ equity (often referred to as the book value of the company) is the number of assets available to the stockholder after its entire liabilities is paid off. The stockholders’ equity is also sometimes referred to as owner's equity. The stockholders’ equity or book value generally includes common stock, treasury stock retained earnings. It is an indicator of a company's financial strength and is an important item on the company's balance sheet.

Question

Assume that a company paid $6 per share to purchase 1,100 shares of its $3 par common stock as treasury stock. The purchase of treasury stock

increased total equity by $3,300.
decreased total equity by $3,300.
decreased total equity by $6,600.
increased total equity by $6,600.

Definition Definition Stock repurchased from the stockholders by the company that once issued it. The repurchase of the stock reduces the stockholder's equity balance on the balance sheet. Treasury stocks are an important constituent of stockholder's equity but do not carry any voting rights.

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