Concerning Treasury Shares, Which of the Following Is/are True

question 29

Multiple Choice

Concerning treasury shares, which of the following is/are true?

• A)Firms recognize no gain or loss from purchasing their own shares or reissuing previously purchased shares.
• B)Differences between the purchase and reissue price are not earnings transactions but affect contributed capital accounts.
• C)Firms account for the purchase of treasury shares using either the cost method or the par value method or the constructive retirement method.
• D)The methods firms use to account for the purchase of treasury shares differ in terms of the shareholders' equity accounts affected, but all result in an equal reduction in total shareholders' equity when firms purchase their own shares.
• E)all of the above

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Definitions:

Operating Lease

A lease agreement for short-term leasing of assets without transferring ownership rights.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a basis for computing rates of return and evaluating its capital structure.

Financial Lease

A type of lease wherein the lessee has possession and control of an asset during its significant life but does not own the asset, effectively treating it as a loan with asset as collateral.

CRA

In the context of Canadian taxation, CRA stands for Canada Revenue Agency, the federal agency responsible for tax collection and enforcement.