To Record the Purchase of Treasury Stock

question 117

Multiple Choice

To record the purchase of treasury stock:

• A) debit Treasury Stock-Common (par value); credit Cash (same).
• B) debit Treasury Stock-Common (purchase price); credit Cash (same).
• C) debit Treasury Stock-Common (par value); debit any difference to Paid-in Capital; credit Cash (purchase price).
• D) None of these answers is correct.

---

Definitions:

Economic Profits

The excess of total revenue over total costs, including both explicit and implicit costs, signifying a return beyond the normal profit level.

Natural Monopoly

A market situation where due to high fixed or startup costs, a single firm can supply a product or service at a lower cost than any potential competitor, leading to a dominance of the market.

Long-Run Average Costs

Reflects the per-unit cost of production when all inputs are considered variable over time, highlighting economies of scale.

Perfectly Price-Discriminated

A pricing strategy where a seller charges the maximum possible price that each consumer is willing to pay, leading to maximum profit without surplus.