Which of the following statements about treasury stock transactions is correct?
A)The total number of shares issued increases when treasury stock is purchased.
B)The total number of shares authorized changes when treasury stock is purchased.
C)Gains and losses on treasury stock transactions are reported on the income statement.
D)A stockholders' equity account is debited when treasury stock is purchaseD.Treasury stock is a contra-equity account with a debit balance.

Question

Quizplus · Accepted Answer

Treasury stock is considered a contra-equity account because it is a reduction in stockholders' equity. When treasury stock is purchased, the stockholders' equity account is debited, reducing total equity. The total number of shares issued does not change when treasury stock is purchased, and gains and losses on treasury stock transactions are reported on the balance sheet as a separate line item. The total number of shares authorized may change, but this is not directly related to treasury stock transactions.

Which of the Following Statements About Treasury Stock Transactions Is