Which Statement Is Correct About the "Single Transaction Method" for Treasury

question 32

Multiple Choice

Which statement is correct about the "single transaction method" for treasury shares?

• A)This method has the same effect on contributed surplus to that of the two transaction method.
• B)This method uses a separate "treasury shares" account upon re-purchase.
• C)This method treats the reacquisition and subsequent sale separately for accounting.
• D)This method decreases contributed surplus at the time of re-purchase.

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Definitions:

Operating Cycle

The duration of time from the purchase of inventory to the collection of receivables from sales, outlining how long it takes for a company to turn investments in inventory into cash.

Safety Stocks

Additional quantities of stock kept in inventory to reduce the risk of stockouts caused by variations in supply or demand.

Average Inventory

Average Inventory is a calculation used to estimate the value or quantity of inventory that a business holds over a specific period, often used for analyzing inventory efficiency.

Net Present Value

The difference between the present value of cash inflows and outflows over a period of time, used to assess the profitability of an investment.