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:

Brokers and Dealers

Individuals or firms in the finance industry that buy and sell securities or commodities on behalf of themselves (dealers) or others (brokers).

Tender Offers

refer to a public proposition by a person or entity to buy shares of a company from its shareholders at a specified price for a certain period, often aiming to gain control of the company.

Proxy Solicitations

The process of requesting the authorization from shareholders to vote on their behalf in company decisions, typically at shareholder meetings.

Sarbanes-Oxley Act

A U.S. federal law aimed at protecting investors from fraudulent accounting activities by corporations, enacted in 2002 in response to major corporate and accounting scandals.