Blueprint Problem: Treasury Stock

Treasury stock

Treasury stock occurs when shares of common stock are bought back by the issuing company. Purchasing back one's own common stock with cash reduces the amount of the stock on the open market available for public purchase. This transaction decreases total Selectassets and liabilitiesassets and stockholders' equityliabilities and stockholders' equityCorrect 1 of Item 1 on the Selectbalance sheetincome statementstatement of cash flowsstatement of retained earningsCorrect 2 of Item 1 . Although buying back its own shares can significantly drain a company's SelectcashequipmentliabilitiesrevenueCorrect 3 of Item 1 , it is a very common transaction.

If a company buys 500 shares of another company on the open market, has it purchased treasury stock? SelectYesNoNot enough informationCorrect 4 of Item 1

The management team at your company has arrived at the following conclusions:

They want to distribute stock to employees through stock options.

Management wishes to augment the stock price by reducing supply of shares outstanding.

There is currently a high risk of a hostile takeover.

As a result of the previous conclusions, it will buy back 4,000 shares of its own common stock at $57 per share.

Note: Whole question on screenshots.

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