The Entry to Record the Reacquisition of Common Shares at a Cost

question 42

Multiple Choice

The entry to record the reacquisition of common shares at a cost lower than the average issue cost requires a

• A) credit to Contributed Surplus.
• B) credit to Contributed Surplus-Reacquisition of Common Shares.
• C) credit to Common Shares.
• D) credit to Retained Earnings.

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Definitions:

Discounted Payback

The period it takes for an investment to break even in cash flow terms, adjusted for the time value of money.

Required Return

The minimum gain or profit that investors expect to receive on an investment relative to its risk.

Average Accounting Rate

A financial metric that represents the average rate of return earned on investments or assets, based on accounting values.

Net Income

The total profit of a company after all expenses, including taxes and operational costs, have been deducted from total revenues.