Which of the following is true concerning the treasury stock approach in accounting for a subsidiary's investment in parent company stock?
A) The original cost of the subsidiary's investment reduces long-term liabilities.
B) The cost of parent shares is treated as if the shares are no longer outstanding.
C) The subsidiary must apply the equity method in accounting for the investment if the treasury stock approach is used.
D) The treasury stock approach increases total stockholders' equity.
E) The cost of parent shares is treated as if the shares are no longer issued.

Question

Quizplus · Accepted Answer

The treasury stock approach treats the cost of parent shares as if the shares are no longer outstanding, effectively reducing the number of shares considered to be in circulation.

Which of the Following Is True Concerning the Treasury Stock