When a company pays more than the fair market value to acquire treasury stock in order to prevent a takeover attempt, the "greenmail" from the transaction is recorded as a(n)
A)expense
B)additional paid-in capital reduction
C)extraordinary loss
D)retained earnings reduction

Question

Quizplus · Accepted Answer

The payment of greenmail is considered an expense because it is a cost incurred to prevent a takeover, not directly related to the company's core operations or capital structure.

When a Company Pays More Than the Fair Market Value