When Treasury Stock Is Resold at a Price Below Cost

question 69

Multiple Choice

When treasury stock is resold at a price below cost:

• A) Additional Paid-in Capital is decreased.
• B) Additional Paid-in Capital is increased.
• C) A gain is reported on the income statement.
• D) A loss is reported on the income statement.

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Definitions:

Short-form Merger

A merger between a parent company and its subsidiary where the parent absorbs the subsidiary without the need for approval by the shareholders of the subsidiary.

Subsidiary

A company that is completely or majority-owned by another company, known as the parent company.

Merger Plan

A detailed proposal for combining two or more companies into one entity, outlining the terms, conditions, and operational strategies post-merger.

Primary Liability

The direct responsibility of an entity or individual to pay a debt or damages without first requiring enforcement against another party.