A contra equity account for treasury stock is included in the shareholders' equity section of the balance sheet. Because it shows how many shares were purchased back on the open market, Treasury stock reduces shareholders' equity by the amount paid for the stock.
What does "treasury stock" refer to?
Treasury stocks are the portion of shares that a company keeps in its own treasury (also known as treasury shares). They might have come from a percentage of the outstanding shares before the company bought them back, or they might not have ever been made available to the public at all. The ABC Company believes the stock is undervalued and has additional cash. Therefore, it decides to repurchase for $50,000.
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