Several years ago, Knox Industries issued 200,000 of its $2 par value stock for a total of $1,600,000. This is the only time that it has sold stock. This year it purchased 2,000 shares of its own stock for $20 a share. As a result of acquiring treasury stock:
A. its stockholders' equity decreases by $40,000.
B. its common stock account decreases by $40,000.
C. its retained earnings decrease by $40,000.
D. it will recognize a loss of $40,000.
Answer: A
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