10.6 Account for treasury shares
1) A company's shares that it reacquires are termed "treasury shares."
2) Treasury shares is a "contra-equity" account and carries a debit balance.
3) Treasury shares decreases the number of outstanding shares of stock.
4) Which of the following is NOT a reason for a company to purchase treasury shares?
A) To reward valued employees
B) To avoid a takeover by an outside company
C) To buy the shares at a high price to increase total shareholders' equity
D) To support the company's stock price
E) To buy the shares when the price is low and sell when the price is higher
5) Casey Company reacquired 5,000 shares of its common stock for $13/share. The debit to treasury shares will be:
A) $10,000.
B) $65,000.
C) $75,000.
D) $5,000.
E) based on the last treasury stock transaction.
6) What is the normal balance of the treasury shares account?
7) Treasury shares are recorded at __________.
8) Do treasury shares increase or decrease the company's shares that are outstanding?
9) Explain how the recording of the purchase of treasury shares differs when cash paid is less than or greater than the average cost.