Question

In January 2020, Justin Corporation, a newly formed company, issued 10,000 shares of its $10 par common stock for $15 per share. On July 1,2020 , Justin Corporation reacquired 1,000 shares of its outstanding stock for $17 per share. The acquisition of these treasury shares

a. decreased total stockholders' equity
b. decreased the number of issued shares
c. increased total stockholders' equity
d. did not change total stockholders' equity

Answer 1

The acquisition of treasury shares did not change total stockholders' equity.

Step-by-step explanation:

The acquisition of treasury shares d. did not change total stockholders' equity.

Treasury shares are shares that a company has repurchased from its shareholders and are held by the company itself. These shares are not considered to be outstanding and are recorded as contra-equity on the company's balance sheet.

When a company reacquires its own shares, it reduces the number of shares outstanding, but it does not change the total stockholders' equity. This is because treasury shares do not have voting rights or receive dividends, and their repurchase does not impact the ownership interests of the remaining shareholders.