Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / What would be the impact on the accounting equation when a company acquires treasury stock? A
What would be the impact on the accounting equation when a company acquires treasury stock?
A. Decrease assets and decrease stockholders' equity
B. Decrease assets and increase stockholders' equity
C. No effect on the accounting equation
D. Increase assets and increase stockholders' equity
Answer choice: A. Decrease assets and decrease stockholder's equity
Explanation:
When a company acquires treasury stock they record the following journal entry:
| Date | General Journal | Debit | Credit |
| Treasury Stock | XX | ||
| Cash | XX |
Treasury stock represents common stock that is repurchased by the corporation. Treasury stock has a debit balance because it is a contra equity account and reduces the total balance in stockholder's equity. Cash is an asset account that is reduced when treasury stock is acquired.
