When a Corporation Acquires Its Own Shares, Those Shares Assume

question 164

Essay

When a corporation acquires its own shares, those shares assume the same status as authorized but unissued shares, as if they never had been issued. Explain how this is reflected in the accounting records if the shares are formally retired.

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Definitions:

Purchase Price

The amount of money paid or to be paid by the buyer to acquire an asset or service from the seller.

Firm Offer

An offer made in writing and containing assurances that it will be irrevocable for a period of time not longer than three months despite a lack of consideration for the irrevocability.

Irrevocability Period

The timeframe during which a decision, offer, or agreement cannot be revoked or withdrawn.

UCC

Stands for the Uniform Commercial Code, a comprehensive set of laws governing all commercial transactions in the United States, intended to harmonize the law of sales and other commercial transactions across the country.