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1 year ago

When treasury stock is purchased for an amount greater than its par, what is the effect on total shareholders' equity?

Business

1 answer:

fomenos1 year ago

8 0

When treasury stock is purchased for an amount greater than its par then the total shareholders' equity decreases.

Given that the treasury stock is purchased for an amount greater than its par.

We are required to find the effect of the purchase of treasury stock for an amount greater than its par on the total shareholders' equity.

Treasury stock is basically known as treasury shares or reacquired stock, and refers to previously outstanding stock that is bought back from stockholders by the issuing company. The result of issuing treasury stock is that the total number of outstanding shares on the open market decreases. Shares of a company are a part of total shareholders' equity and because shares are issued for security, it will decrease the total shareholders;equity.

Hence when treasury stock is purchased for an amount greater than its par then the total shareholders' equity decreases.

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2 years ago

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Explanation:

Note: There are errors as date and name inconsistency in the requirements in this question. The requirements are therefore correctly stated before answering the question as follows:

(a) Prepare a statement of cash flows for the year 2020 for Ayayai Inc.

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