The Acquisition of Treasury Stock by a Corporation

question 35

Multiple Choice

The acquisition of treasury stock by a corporation

• A) increases its total assets and total stockholders' equity.
• B) decreases its total assets and total stockholders' equity.
• C) has no effect on total assets and total stockholders' equity.
• D) requires that a gain or loss be recognized on the income statement.

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Definitions:

Unrecognized Compensation Cost

Expenses for employee compensations that have been incurred but not yet reported in the financial statements due to accounting rules.

Convertible Securities

Convertible securities are financial instruments, like bonds or preferred shares, that can be converted into a predetermined number of another type of security, typically shares of common stock, at the option of the holder or the issuer.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuer's equity shares at certain times during the bond's life, usually at the discretion of the bondholder.

Stockholders' Equity

The residual interest in the assets of a company after deducting liabilities, representing the owners' claim on the business.