A Corporation Purchases 40,000 Shares of Its Own $30 Par

question 19

Multiple Choice

A corporation purchases 40,000 shares of its own $30 par common stock for $45 per share, recording it at cost. What will be the effect on total stockholders' equity?

• A) Increase by $1,800,000
• B) Decrease by $1,200,000
• C) Decrease by $1,800,000
• D) Increase by $1,200,000

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Definitions:

Treasury Stock

Shares that were once part of the open market stock but were bought back by the issuing company, reducing the amount of outstanding stock.

Quorum

The minimum number of members required to be present at a meeting to make the proceedings of that meeting valid.

Shareholder Agreement

A contract among shareholders of a company outlining their rights, obligations, and mutual agreements regarding company operations and governance.

Duration

The length of time during which something exists or continues.