Treasury Stock:

Question

Treasury Stock:

 

A. has a normal credit balance.

 

B. decreases stockholders' equity.

 

C. is recorded as an investment.

 

D. increases stockholders' equity.

Answer 1

Since company is buying back shares, it will reduce the shares held by the shareholders, however cash is used/company equity, as this reduces the equity of the company, that is appearing as a negative on this entry, though it is a contra entry for company. Srock holders equity will reduce.