Which of the following statements about treasury stock transactions is correct?

A) The total number of shares issued increases when treasury stock is purchased.
B) The total number of shares authorized changes when treasury stock is purchased.
C) Gains and losses on treasury stock transactions are reported on the income statement.
D) A stockholders' equity account is debited when treasury stock is purchased.

Question

sheba baidoo · Accepted Answer

Final Answer : D, Explanation :  When treasury stock is purchased, a stockholders' equity account is debited because it represents a decrease in the total amount of equity owned by shareholders. The total number of shares issued and authorized do not change with treasury stock transactions. Gains and losses on treasury stock transactions are reported in the shareholders' equity section of the balance sheet, not the income statement.

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