Question $26$

$1$ pts

When a corporation buys back its own common stocks from the market, what are these stocks $($that have been purchased back$)$ called, and how does the transaction affect the company's financial position?

They are recorded as Preferred Stock because the company is becoming a preferred owner of its own stocks. It increases the company's Assets and Owners' Equity.

Purchasing common stocks of a company $($for future sale$)$ is considered an investing activity. For this nature, they are recorded as "Marketable Securities" in the Balance Sheet's current asset section. The purchase transaction increases the company's Assets; but it decreases the Owners' Equity.

They are recorded as additional common stock; and become part of the company's Equity. It decreases the company's Assets due to the cash payment for the purchase. The company's Owners' Equity increase.

They are called Treasury Stock; and presented in the Balance Sheet with negative value. The purchase transaction decreases both Assets and Owners' Equity of the company.