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:

Credit Purchases

Transactions where goods or services are bought using credit rather than paying with cash or immediate payment, with repayment usually occurring at a future date.

Accounts Payable

Liabilities of a company or organization representing money owed to suppliers or creditors for goods and services received.

Dividends Paid

The portion of a company's earnings that is distributed to shareholders, typically in the form of cash payments or additional stock.

Net New Investments

This refers to the total amount of money invested in new asset purchases minus any sales of assets over a specific period, reflecting a company's growth investment activities.