When a company purchases treasury stock,which of the following statements is true?
A)Treasury stock is considered to be an asset because cash is paid for the stock.
B)The cost of the treasury stock reduces stockholders' equity.
C)Dividends continue to be paid on the treasury stock because it is still issued.
D)Since treasury stock is held by the original issuer,it is no longer considered to be issued.

Question

Quizplus · Accepted Answer

When a company purchases treasury stock, it is considered to be a reduction of stockholders' equity since the cash used to buy the shares is no longer available to the company for other purposes. Treasuring stock is not considered to be an asset since it represents shares that are no longer outstanding. Dividends are typically not paid on treasury stock since the shares are not considered to be outstanding.

When a Company Purchases Treasury Stock,which of the Following Statements