Several Years Ago,Knox Industries Issued 200,000 of Its $2 Par

question 129

Multiple Choice

Several years ago,Knox Industries issued 200,000 of its $2 par value stock for a total of $1,600,000.This is the only time that it has sold stock.This year it purchased 2,000 shares of its own stock for $20 a share.As a result of acquiring treasury stock:

• A)its stockholders' equity decreases by $40,000.
• B)it will recognize a loss of $40,000.
• C)its common stock account decreases by $40,000.
• D)its retained earnings decrease by $40,000.