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16 June, 00:00

A corporation purchases 35000 shares of its own $20 par common stock for $30 per share, recording it at cost. What will be the effect on total stockholders' equity? Decrease by $700000. Decrease by $1050000. Decrease by $350000. Increase by $1050000.

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  1. 16 June, 00:15
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    Decrease by $1,050,000

    Explanation:

    Data provided as per the question

    Purchase shares = 35,000

    Common stock per share = $30

    The computation of total stockholders' equity is shown below:-

    Treasury stock = Purchase shares * Common stock per share

    = 35,000 * $30

    = $1,050,000

    Shareholder's Equity will be reduced by $1,050,000. So, for calculating the shareholder equity we simply applied the above formula.
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