When Preferred Stock Is Purchased by the Issuing Corporation at a Price

question 39

Multiple Choice

When preferred stock is purchased by the issuing corporation at a price below the original issue price and the stock is retired, the transaction:

• A) Increases net income for the year.
• B) Increases retained earnings.
• C) Increases revenue for the year.
• D) Increases paid-in capital--share repurchase.

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Definitions:

Debt

An amount of money borrowed by one party from another, to be paid back with interest.

Solvency

The ability of a company to meet its long-term financial obligations and continue operations indefinitely.

Horizontal Analysis

A financial analysis technique that compares historical financial data over a series of reporting periods, to identify trends and growth patterns.

Audit

A systematic examination and evaluation of financial records or transactions of an entity to ensure accuracy, compliance with standards, or regulations.