Question

The effect of repurchasing stock using the cost method is to ______. (Check all that apply.) Multiple select question. decrease assets decrease stockholders' equity increase Treasury Stock decrease liabilities increase liabilities decrease Treasury Stock increase assets

Answer 1

The effect of repurchasing stock using the cost method is to Increase Treasury Stock, Decrease stockholders' equity ,Decrease Assets.

What is Cost Method?

• Certain investments are recorded using the cost method of accounting in a company's financial statements.
• When an investor holds an investment that it has little or no control over—typically described as owning less than 20% of the company—they employ this strategy. On the balance sheet, the investment is listed as an asset at its historical cost.
• The investor lists the investment's cost as an asset. Dividend income is recorded as income when it is received and appears on the income statement.
• Depending on the investor's accounting principles, the receipt of a dividend also boosts the cash flow, either in the investing portion or the operational area of the cash flow statement.

Treasury stock, commonly referred to as treasury shares or reacquired stock, describes previously outstanding stock that the issuing corporation purchases back from stockholders. The effect of repurchasing stock using the cost method increases treasury stock.

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