Question

Kaplan purchased 2500 shares of its own previously issued $10 par common stock for $62500. As a result of this event,


a. Kaplan’s Common Stock account decreased $25000.

b. Kaplan’s total stockholders’ equity decreased $62500.

c. Kaplan’s Paid-in Capital in Excess of Par Value account decreased $37500.

d. All of these answer choices are correct.

Answer 1

Answer:

b. Kaplan’s total stockholders’ equity decreased $62500.

Explanation:

In the given scenario, the previously issued common stock was purchased for $62,500 which reflects the treasury stock and as we know that, the treasury stock reduces the balance of the total stockholder equity.

While computing the stockholder equity balance, we deduct the treasury stock

So, the total stockholders’ equity would decreased by $62,500