A Company Purchased Its Own Shares on January 1, 2014

question 100

Multiple Choice

A company purchased its own shares on January 1, 2014 for $20,000 and debited Treasury Shares for the purchase price. The shares were subsequently sold for $12,000. The $8,000 difference between the cost and sales price should be recorded as a debit to

• A) retained earnings
• B) loss from sale of treasury shares
• C) Contributed Surplus to the extent that previous net "gains" from sales or retirements of the same class of shares exist, otherwise, to retained earnings
• D) Contributed Surplus, regardless of whether previous net "gains" from sales or retirements of the same class of shares exist.

---

Definitions:

Internet Protocol

The Internet Protocol (IP) is a set of rules governing the format of data sent over the Internet or other networks, essentially facilitating the addressing and routing of packets to their destinations.

Network Interface

A boundary or point of interaction between a computer and a network, including both hardware and software components.

TCP/IP Layer

A set of protocols governing communications among all computers on the Internet. It has four abstraction layers defined by the Transmission Control Protocol and the Internet Protocol.

Ethernet

A technology for connecting devices in a wired local area network (LAN) enabling the transmission of data over a physical cable.