Which of the following statements is true regarding a corporation's purchase of treasury stock?

Question

Quizplus · Accepted Answer

When a corporation purchases its own stock (treasury stock), the cost of treasury stock is a reduction in stockholders' equity. This is because the amount of equity originally recorded for the shares being repurchased is reduced. Therefore, option A is the correct statement. Options B, C and D are incorrect because dividends are not paid on treasury stock, treasury stock is not considered an asset because it represents a reduction in equity, and treasury stock is still considered issued even when it is bought back by the corporation.

Which of the Following Statements Is True Regarding a Corporation's