BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which of the following statements about treasury shares is (are) true?
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Treasury shares are recorded at cost
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Purchase of treasury shares reduces the corporation’s total assets and total shareholders’ equity
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Treasury shares are issued shares that are subsequently reacquired, hence, they are no longer outstanding
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All of the foregoing statements are true
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Explanation:
Detailed explanation-1: -The true statement is c. Reacquiring treasury stock causes stockholders’ equity to decrease.
Detailed explanation-2: -Which of the following is TRUE regarding the accounting for treasury stock? Treasury stock is reported on the balance sheet in the equity section.
Detailed explanation-3: -The correct option is c. May decrease but not increase retained earnings. Explanation: Treasury stock transactions can decrease retained earnings if the corporation incurs a loss on the sale of the stock.
Detailed explanation-4: -Treasury stocks are shares that were originally part of “shares outstanding” but that have been repurchased by the company.
There is 1 question to complete.