Question

Dilution solutions, inc. repurchased 500 shares of its $2 par value common stock for $10,000. the effect of this transaction on the accounting equation, using the cost method, includes a ______. (check all that apply.) multiple select question. $10,000 increase in treasury stock $1,000 increase in stockholders' equity $10,000 decrease in cash $9,000 decrease in additional paid-in capital

Answer 1

$10,000 increase in Treasury Stock is the effect of this transaction.

What is cost method?

The cost method exists as a method of accounting. It is utilized for recording precise investments in a company's financial statements. This particular method lives used when an investor has little or no effect over the investment that they own.

The cost method of accounting is used for recording particular investments in a company's financial statements. This method is used when the investor exercises little or no influence over the acquisition that it owns, which exists typically represented as owning less than 20% of the company.

Treasury stock stands also known referred to as treasury shares and it happens when stock stands bought by the issuing company back from the stockholders.

This results in a reduction in the whole number of outstanding shares that can be found on the open market. In the above scenario, since Dilution Solutions, Inc. repurchased 500 shares of its $2 par value common stock for $10,000, this will get about a $10,000 gain in the treasury stock.

To learn more about cost method refer to:

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