Question

When treasury stock is reissued and the cost is less than the reissue price, the difference increases additional paid-in capital.

a) True
b) False

Answer 1

True (a), the difference between the cost of treasury stock and its reissue, price increases additional paid-in capital. This reflects the excess capital contributed by shareholders beyond the par value of the stock.

Step-by-step explanation:

When treasury stock is reissued at a price higher than its cost, the statement is true (a): the difference between the reissue, price and the cost increases additional paid-in capital. This occurs because the sale of treasury stock above its cost represents capital contributed by shareholders that is in excess of the par or stated value of the stock.

Companies may issue stock to raise financial capital for expansion, which can be beneficial for growing firms. However, this process requires compliance with various regulations and the expertise of financial professionals. Investors purchasing stock generally expect a return, which can come in the form of dividends or capital gains from the appreciation of stock value.