A Corporation Purchases 30,000 Shares of Its Own $20 Par

question 129

Multiple Choice

A corporation purchases 30,000 shares of its own $20 par ordinary shares for $35 per share, recording it at cost.What will be the effect on total equity?

• A)Increase by $1,050,000
• B)Decrease by $600,000
• C)Decrease by $1,050,000
• D)Increase by $600,000

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Definitions:

Variable Costing

A method of cost accounting in which only variable production costs (materials, labor, and variable overhead) are included in the cost of a unit of product.

Unit Product Cost

The total cost to produce one unit of a product, including direct materials, direct labor, and overhead allocated on a per-unit basis.

Absorption Costing

This method in accounting ensures that the costing of a product fully reflects all manufacturing expenses, which cover direct materials, direct labor and all overhead costs, fixed and variable alike.

Variable Costing

This is an accounting technique that incorporates only the variable costs of production, including direct materials, direct labor, and variable manufacturing overhead, into the costs of products.