If common shares are reacquired at a price less than their average cost, the difference is credited to contributed surplus.

Question

Quizplus · Accepted Answer

This statement is true according to generally accepted accounting principles (GAAP). The difference between the reacquisition price and the average cost is known as the gain on reacquisition, and it is credited to contributed surplus rather than being recognized as a profit or loss in the income statement. This helps to maintain the integrity of the stated equity of the company.

If Common Shares Are Reacquired at a Price Less Than