Indicate Whether Each of the Following Statements About Treasury Stock

question 41

Short Answer

Indicate whether each of the following statements about treasury stock is true or false.
_____ a)One reason for a corporation to buy its own stock is to boost its net income when treasury stock is reissued for a higher price.
_____ b)Corporations may buy back their own stock (treasury stock)to avoid hostile takeovers.
_____ c)Purchasing treasury stock reduces the number of issued shares.
_____ d)The treasury stock account is classified as a negative equity account.
_____ e)If treasury stock is reissued for an amount lower than its purchase price,retained earnings is increased.

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Definitions:

Gross Profit Method

A method used to determine the value of the ending inventory using a predetermined gross profit rate. This method can be used to determine value of ending inventory if a loss from fire occurs.

Gross Profit

The financial metric calculated by subtracting cost of goods sold from total net sales, reflecting the efficiency of a company in managing its manufacturing costs.

LIFO

LIFO (Last In, First Out) is an inventory costing method where the most recently produced or purchased items are the first to be expensed.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing insight into financial health.