How does treasury stock affect the outstanding shares


Response to the following questions:

1. Purchase of treasury stock (a) has no effect on assets; (b) reduces total assets and total equity by equal amounts; or (c) is recorded with a debit to Retained Earnings.

2. Southern Co. purchases shares of Northern Corp. Should either company classify these shares as treasury stock?

3. How does treasury stock affect the authorized, issued, and outstanding shares?

4. When a company purchases treasury stock, (a) retained earnings are restricted by the amount paid; (b) Retained Earnings is credited; or (c) it is retired.

 

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Financial Accounting: How does treasury stock affect the outstanding shares
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