Which one of the following statements is not true?
A)Treasury stock transactions do not result in gains or losses on the income statement.
B)Retained earnings may be restricted regarding dividends when treasury stock is held.
C)The total amount of stockholders' equity is unaffected by the method used to account for treasury stock.
D)Treasury stock transactions may result in an increase to retained earnings.

Question

Quizplus · Accepted Answer

Treasury stock transactions involve a company buying back its own shares from the open market. These transactions are accounted for as a reduction in stockholders' equity, not as an increase to retained earnings. Treasury stock is recorded at cost and does not affect the income statement; therefore, it does not result in gains or losses that would impact retained earnings.

Which One of the Following Statements Is Not True