When treasury stock is sold for more than the company originally paid to purchase the shares, the difference:

A) Increases net income.

B) Increases stockholders' equity.

C) Has no effect on net income or stockholders' equity.

D) Decreases net income and decreases stockholders' equity.

Answer: B

A company currently has 200,000 shares issued and 190,000 shares outstanding. If the company purchases 20,000 shares of treasury stock, what amount of shares will be outstanding?

A) 170,000.

B) 220,000.

C) 210,000.

D) 180,000.

Answer: A

The purchase of treasury stock can boost earnings per share by:

A) Increasing the number of shares outstanding.

B) Increasing profits.

C) Reducing the number of shares outstanding.

D) Decreasing the company's obligation to pay dividends.

Answer: C

Why would a corporation purchase its own stock?

A) To distribute surplus cash without paying dividends.

B) To boost earnings per share.

C) To satisfy employee stock ownership plans.

D) All of the other answer choices are correct.

Answer: D

The corporation's own stock that has been issued and then bought back by the company is referred to as:

A) Preferred Stock.

B) Authorized Stock.

C) Treasury Stock.

D) Common Stock.

Answer: C

What would be the impact on the accounting equation when a company acquires treasury stock?

A) Increase assets and increase stockholders' equity.

B) Decrease assets and increase stockholders' equity.

C) Decrease assets and decrease stockholders' equity.

D) No effect on the accounting equation.

Answer: C

Which of the following is TRUE regarding the accounting for treasury stock?

A) Treasury stock is reported on the balance sheet in the equity section.

B) The purchase and sale of treasury stock has no impact on the income statement.

C) Treasury stock represents a negative equity account.

D) All of the other answer choices are correct.

Answer: D