A Possible Result of the Reacquisition and Cancellation of Shares

question 239

Multiple Choice

A possible result of the reacquisition and cancellation of shares by a corporation is that this may

• A)directly increase but not decrease retained earnings.
• B)increase net income if a gain is recognized.
• C)directly decrease but not increase retained earnings.
• D)decrease but not increase net income.
• Shareholders' Equity 15- 13

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Definitions:

Translation Risk

The gain or loss on the value of assets and liabilities held in another country that results from variation in exchange rates. Generally relatively meaningless as long as the foreign operation is not liquidated or sold. Therefore not generally taxable.

Consolidated Income Statements

A financial statement that aggregates the income statements of a parent company and its subsidiaries to show the total earnings and financial performance of the entire group.

Protectionism Law

Legislation intended to protect domestic industries from foreign competition through tariffs, quotas, or other restrictions.

Importation

The process of bringing goods or services into a country from abroad for the purpose of selling.