The 2010 sale of half of the treasury stock would:
A)Reduce income before tax by $60,000.
B)Reduce retained earnings by $60,000.
C)Increase total shareholders' equity by $300,000.
D)Decrease retained earnings by $40,000.

Question

Quizplus · Accepted Answer

Sale of treasury stock does not affect income before tax or total shareholders' equity. It only reduces the company's retained earnings. The sale of half of the treasury stock for $100,000 would reduce retained earnings by $40,000 (50% of $80,000, which is the cost of the treasury stock). Therefore, option D is the correct answer.

The 2010 Sale of Half of the Treasury Stock Would