How will a company classify the sale of treasury stock at an amount equal to its cost on its statement of cash flows?
A)Operating activity
B)Investing activity
C)Extraordinary activity
D)Financing activity

Question

Quizplus · Accepted Answer

The sale of treasury stock represents a financing activity because it involves a transaction related to the company's own capital accounts. When a company sells its own stock, it is essentially selling a claim to the company's assets and future earnings, so the cash received from the sale should be classified as a financing cash flow. Additionally, selling treasury stock at cost does not result in a gain or loss, so it would not be classified as an extraordinary item.

How Will a Company Classify the Sale of Treasury Stock