Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Business Formation Example

Financial Accounting

2. Transaction Analysis

Journal Entries: Business Formation Example

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Multiple Choice

After a company purchases treasury stock on October 11, how should the stockholders' equity section of the balance sheet reflect this transaction?

Treasury stock is reported as a deduction from total stockholders' equity.

Treasury stock is reported as a liability in the balance sheet.

Treasury stock increases the total stockholders' equity.

Treasury stock is reported as an asset in the current assets section.

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Verified step by step guidance

Understand the concept of treasury stock: Treasury stock refers to shares that a company has repurchased from its shareholders. These shares are not considered outstanding and do not have voting rights or earn dividends.

Recognize the accounting treatment for treasury stock: Treasury stock is not classified as an asset or liability. Instead, it is reported as a deduction from total stockholders' equity in the balance sheet.

Analyze the impact on stockholders' equity: When a company purchases treasury stock, it reduces the total stockholders' equity because the repurchased shares are subtracted from the equity section.

Review the incorrect options: Treasury stock is not reported as a liability, nor does it increase stockholders' equity. It is also not classified as an asset in the current assets section.

Conclude the correct reporting method: Treasury stock is reported as a deduction from total stockholders' equity, reflecting its nature as a reduction in the company's equity.