How Should a Gain from the Sale of Treasury Stock

question 36

Multiple Choice

How should a gain from the sale of treasury stock be reflected when using the single transaction method of recording treasury stock transactions?

• A) As an extraordinary item shown on the income statement
• B) As ordinary earnings shown on the income statement
• C) As contributed capital from treasury stock transactions
• D) As an increase in the amount shown for common stock

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Definitions:

Tolerances

The permitted variations in measurements or physical characteristics in the manufacturing or production of goods.

Economies of Scale

Economies of scale describe the reduction in per-unit cost that a company benefits from as it scales up production. This cost benefit is due to the fixed costs spreading over a larger number of units.

Economies of Scope

Cost advantages that enterprises obtain by producing a wide range of products, diversifying their output, and sharing production inputs.

Economies of Scope

Cost advantages that enterprises obtain due to the efficient production of a wide range of products rather than specializing in a single product or service.