Question

when a company purchases treasury stock, which of the following statements is true? a. it is no longer considered to be issued. b. treasury stock is considered to be an asset because cash is paid for the stock. c. dividends continue to be paid on the treasury stock. d. the cost of the treasury stock reduces stockholders' equity.

Answer 1

When a company purchases treasury stock, the cost of the treasury stock reduces stockholders' equity. Therefore, the correct option is D.

Step-by-step explanation:

When a company purchases treasury stock, the statement that is true is d. the cost of the treasury stock reduces stockholders' equity. Treasury stock refers to the company's own stock that has been repurchased from the shareholders and is held by the company itself. By purchasing treasury stock, the company reduces its stockholders' equity because it is essentially buying back its own shares, which decreases the ownership interest of the shareholders.

Regarding the other statements:

• a. Treasury stock is still considered to be issued even after it has been repurchased by the company.
• b. Treasury stock is not considered to be an asset because it represents the company's own shares and is deducted from stockholders' equity.
• c. Dividends are not paid on treasury stock.