Which of the Following Is True Concerning the Treasury Stock

question 61

Multiple Choice

Which of the following is true concerning the treasury stock approach in accounting for a subsidiary's investment in parent company stock?

• A) The original cost of the subsidiary's investment reduces long-term liabilities.
• B) The cost of parent shares is treated as if the shares are no longer outstanding.
• C) The subsidiary must apply the equity method in accounting for the investment if the treasury stock approach is used.
• D) The treasury stock approach increases total stockholders' equity.
• E) The cost of parent shares is treated as if the shares are no longer issued.

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Definitions:

Electrical Charge

A fundamental property of matter that causes it to experience a force when placed in an electromagnetic field, typically described as positive or negative.

Cholesterol

A waxy type of lipid that is essential for the formation of cell membranes, certain hormones, and is involved in other biological functions, but high levels may lead to heart disease.

Phospholipid

A type of lipid molecule that is a major component of cell membranes, made up of two fatty acids, a phosphate group, and a glycerol backbone.

Protein

Large, complex molecules made up of amino acids that perform a vast array of functions including structural, enzymatic, and regulatory roles in cells.