When Treasury Shares Are Resold at a Price Below Cost

question 113

Multiple Choice

When treasury shares are resold at a price below cost:

• A)Paid-in capital and/or retained earnings is reduced.
• B)Paid-in capital and/or retained earnings is increased.
• C)Retained earnings is always reduced.
• D)A loss is taken on the income statement.

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Definitions:

Fair Value

Fair value is the estimated market price of an asset or liability, reflecting its current value in an orderly transaction between willing market participants.

Vested Options

Stock options granted to an employee that the employee has the right to exercise, contingent upon fulfilling certain conditions such as employment duration.

Income

The financial gain received by an individual or a business in exchange for providing goods, rendering services, or through investing capital.