True or False (Review Materials) Part 4

Question 1

Treasury shares are accounted at cost, irrespective of the par value, stated value, or market value of
the share capital acquired. True or False?

Answer 1

True

Question 2

Treasury shares are treated as an asset in the Statement of Financial Position. True or False?

Answer 2

False. They are contra-equity.

Question 3

Treasury shares do not affect the number of issued shares but they reduce the number of outstanding
shares. True or False?

Answer 3

True

Question 4

When a treasury share is issued below cost, the deficiency shall be absorbed by Share Premium -
Excess of Par (if any) and Accumulated Profits. True or False?

Answer 4

False. Share Premium - Treasury shares.

Question 5

Acquisition of treasury shares will increase the Shareholders’ Equity. True or False?

Answer 5

False. Decrease at cost

Question 6

The gain on the sale of treasury shares affects income. True or False?

Answer 6

False. Gain on sale shall be credited to Share Premium from Treasury Shares.

Question 7

Treasury Shares shall have no voting rights as long as the equity shares remain in the Treasury. True or False?

Answer 7

True

Question 8

The offer price normally includes the unpaid subscriptions, interest accrued (if any), and expenses
related to the sale. True or False?

Answer 8

True

Question 9

When a subscription becomes delinquent, the unpaid subscription is vested in the corporation as
treasury shares. True or False?

Answer 9

False. Public auction, if no bidder – is vested in the corporation.