Which statement correctly describes treasury stock?

Which statement correctly describes treasury stock?

• A. Shares outstanding in the market
• B. Shares reacquired by the corporation
• C. Authorized but unissued shares
• D. Issued shares with special dividends

Answer: (B)

Treasury stock are shares that the company has issued and then bought back, and now holds in its own treasury. Because these shares are held by the company, they are not considered outstanding shares available in the market, and they typically carry no voting rights or dividends while in treasury. The company can later reissue them if needed. From an accounting perspective, purchasing treasury stock reduces cash and increases a contra-equity account, which lowers total shareholders’ equity. When the shares are reissued, cash increases and the treasury stock balance is reduced, with any difference affecting additional paid-in capital from treasury stock. The other descriptions don’t fit: shares outstanding are the ones in the market, authorized but unissued shares haven’t been issued yet, and issued shares with special dividends describe distributions to shareholders, not shares held by the company itself.

Treasury stock are shares that the company has issued and then bought back, and now holds in its own treasury. Because these shares are held by the company, they are not considered outstanding shares available in the market, and they typically carry no voting rights or dividends while in treasury. The company can later reissue them if needed.

From an accounting perspective, purchasing treasury stock reduces cash and increases a contra-equity account, which lowers total shareholders’ equity. When the shares are reissued, cash increases and the treasury stock balance is reduced, with any difference affecting additional paid-in capital from treasury stock. The other descriptions don’t fit: shares outstanding are the ones in the market, authorized but unissued shares haven’t been issued yet, and issued shares with special dividends describe distributions to shareholders, not shares held by the company itself.