Which Statement Best Describes the Accounting When a Company Cancels

question 73

Multiple Choice

Which statement best describes the accounting when a company cancels its own shares at an amount lower than the average share value?

• A)Contributed surplus and retained earnings will be credited.
• B)Contributed surplus and retained earnings will be debited.
• C)Contributed surplus will be credited,thereby increasing equity.
• D)Contributed surplus will be debited,thereby decreasing equity.

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Definitions:

Ledger

A book or other collection of financial accounts of a particular type.

Prepaid Insurance

The portion of insurance premiums that have been paid in advance and are recorded as an asset on the balance sheet until the coverage period expires.

Umbrella Insurance Policy

An insurance policy designed to provide additional coverage beyond the limits of the insured's homeowners, auto, and watercraft personal insurance policies. It supplements existing insurance by offering protection against claims that may exceed other policies' limits.

Adjusting Entries

Bookkeeping entries made at the end of an accounting period to update accounts for accruals and deferrals.