In preparing a statement of cash flows, repurchase of a company's own shares at an amount greater than cost would be classified as a(n)
A) operating activity.
B) extraordinary activity.
C) financing activity.
D) investing activity.

Question

Quizplus · Accepted Answer

Repurchase of a company's own shares is considered a financing activity because it involves the use of cash to reduce the number of outstanding shares, which results in an increase in the ownership percentage of the remaining shareholders. If the repurchase is above cost, the excess amount is treated as a reduction of retained earnings, which is a financing activity.

In Preparing a Statement of Cash Flows, Repurchase of a Company's