Question

Leary Manufacturing Corporation purchased 5,000 shares of its own previously issued $10 par common stock for $115,000. As a result of this event,a. Leary's Common Stock account decreased $50,000.b. Leary's total stockholders' equity decreased $115,000.c. Leary's Paid-in Capital in Excess of Par Value account decreased $65,000.d. All of these answer choices are correct.

Answer 1

B. Leary's total stockholders' equity decreased $115,000.

Step-by-step explanation:

When a company purchases its previously issued stocks, this is called Treasury Stocks. These becomes stocks issued but not part of the outstanding stocks and are not included in the computation of Earnings Per Share. When Treasury Stock is presented in the Stockholder's Section of the Balance Sheet, this is deducted from the total Stockholder's Equity, notwithstanding the par value of the common stock.