A possible result of the reacquisition and cancellation of shares by a corporation is that this may
A) directly increase but not decrease retained earnings.
B) increase net income if a gain is recognized.
C) directly decrease but not increase retained earnings.
D) decrease but not increase net income.

Question

Quizplus · Accepted Answer

Reacquisition and cancellation of shares by a corporation directly decrease retained earnings because the cost of the repurchased shares is often accounted for by reducing the retained earnings. It does not directly increase retained earnings or net income.

A Possible Result of the Reacquisition and Cancellation of Shares