When a Firm Reacquires Common Shares Under the Constructive Retirement

question 180

Multiple Choice

When a firm reacquires common shares under the Constructive Retirement Method for Repurchased Shares:

• A)the Treasury Stock-Common account has a debit balance and therefore reduces total shareholders' equity.
• B)the accountant debits the Treasury Stock-Common account for the par value of the repurchased shares, debits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Retained Earnings for any difference between the repurchase price.
• C)the accountant debits the Common Stock account for the par value of the repurchased shares, debits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Retained Earnings for any difference between the repurchase price.
• D)the Treasury Stock-Common account has a credit balance and therefore reduces total shareholders' equity.
• E)the accountant credits the Common Stock account for the par value of the repurchased shares, credits Additional Paid-In Capital for the difference between the original issue price of the shares and par value, and plugs Retained Earnings for any difference between the repurchase price.

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Definitions:

Regression Sum of Squares

A measure of the variability explained by the regression model, calculated as the sum of the squared differences between the predicted values and the mean of the dependent variable.

Total Sum of Squares

A statistical measure representing the total variation or spread of a dataset from its mean, used in various statistical models to assess the explanatory power of predictors.

Coefficient of Determination

A statistical measure that represents the proportion of the variance for a dependent variable that's explained by one or more independent variables in a regression model.

SST

An abbreviation that can refer to several concepts depending on context, such as Sum of Squares Total in statistics, which measures the total variation in a dataset.