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.

---

Definitions:

Production

The process of creating goods and services through the combination of labor, capital, and resources.

Division of Labor

The allocation of different tasks to different people or groups in an effort to improve efficiency.

Exchange Rate

The value of one currency for the purpose of conversion to another, determining how much of one currency can be exchanged for another currency.

Honduras

A country located in Central America, characterized by its rich culture, historical sites, and a diverse landscape that includes mountains, rainforests, and coastal beaches.