10.3 Learning Objective 10-3
1) The purchase of treasury stock by a corporation increases total assets and stockholders' equity.
2) The purchase of treasury stock has the same effect on stockholders' equity as issuing stock.
3) Treasury stock is a contra-stockholders' equity account.
4) The purchase of treasury stock decreases the number of shares outstanding.
5) Treasury stock belongs in the stockholders' equity section of the balance sheet.
6) Previously issued stock that a corporation purchases from shareholders is called:
A) outstanding stock.
B) authorized stock.
C) issued stock.
D) treasury stock.
7) Gruber Law Offices paid $54,000 to buy back 9,000 shares of its $1 par value common stock. The stock was sold later at a selling price of $10 per share. The journal entry to record the sale would include a:
A) credit to Paid-in Capital from Treasury Stock Transactions $54,000.
B) debit to Common Stock $54,000.
C) credit to Paid-in Capital from Treasury Stock Transactions $36,000.
D) credit to Common Stock $36,000.
8) Reasons that a company would purchase treasury stock include all of the following EXCEPT:
A) management wants to avoid a takeover by an outside party.
B) it needs the stock for distribution to employees under stock purchase plans.
C) it wants to increase net assets by buying its stock low and reselling it at a higher price.
D) management wants to decrease earnings per share of common stock.
9) Peter's Computers purchased 4,000 shares of its own $10 par value common stock for $92,000. As a result of this transaction:
A) Peter's stockholders' equity increased $52,000.
B) Peter's stockholders' equity increased $40,000.
C) Peter's stockholders' equity decreased $92,000.
D) Peter's stockholders' equity increased $92,000.
10) Treasury stock accounts for the difference between the number of:
A) issued shares and authorized shares.
B) issued shares and preferred shares.
C) outstanding shares and issued shares.
D) authorized shares and outstanding shares.