Learning Objective 8-3
1) Treasury stock ________.
A) is a contra-equity account
B) is the amount of stock issued by the company
C) results in an increase in total shareholders’ equity
D) is a contra-asset account
2) Corporations repurchase their own stock to ________.
A) obtain stock to distribute to employees for stock options and retirement plans
B) decrease earnings per share
C) serve as a weapon in a hostile takeover of another company
D) decrease the market price of the stock
3) When a company buys shares of its own stock and holds them as treasury stock, ________.
A) its earnings per share are not affected
B) its earnings per share will increase
C) its earnings per share will decrease
D) the market price of its stock will decrease
4) The purchase of treasury stock ________ a corporation’s assets and ________ its shareholders’ equity.
A) increases; increases
B) decreases; increases
C) increases; decreases
D) decreases; decreases
5) Treasury stock is shown as ________ on the balance sheet.
A) a reduction of total shareholder’s equity
B) an addition to total shareholder’s equity
C) a reduction of total retained earnings
D) an addition to total retained earnings
6) The purchase of treasury stock ________.
A) requires recognition on the income statement of any gain made on the purchase
B) requires recognition on the income statement of any loss incurred on the purchase
C) does not require recognition on the income statement of any gain made on the purchase
D) always decreases net income
7) Treasury stock is a(n) _____ account.
A) asset
B) contra-asset
C) equity
D) contra-equity
8) The number of shares of treasury stock plus the number of shares outstanding equals the total amount of ________.
A) issued stock
B) voting stock
C) stock authorized
D) stock entitled to dividends
9) Team Shirts repurchased $3,700 worth of its stock via the stock market. This purchase ________.
A) increased assets
B) decreased total shareholders’ equity
C) increased retained earnings
D) decreased retained earnings
10) Team Shirts purchased $5,000 worth of its own stock in the stock market. The transaction would _________ cash by $5,000 and _________ shareholders’ equity by $5,000.
A) increase; increase
B) decrease; decrease
C) increase; decrease
D) decrease; increase