Question

Which of the following statements about Treasury Stock is correct? Multiple Choice The balance in the Treasury Stock account increases paid-in capital. The balance in the Treasury Stock account reduces paid-in capital. The balance in the Treasury Stock account reduces total Stockholders' Equity. The balance in the Treasury Stock reduces Retained Earnings.

Answer 1

Answer:

The balance in the Treasury Stock account reduces total Stockholders' Equity

Explanation:

Treasury stock also known as reacquiring stock refers to outstanding shares which were previously owned by a company which is then bought back by shareholders of that company. Treasury stock do not have much value but provide  means of  raising the price of share which in turn provides profits for investors.  

Treasury stock is normally recorded in the shareholders equity section of the balance sheet representing the number of repurchased shares from the open market, thereby reducing shareholder's equity by the amount paid for the stock