Treasury stock transactions might cause: Multiple Choice An increase in the balance of retained earnings. An increase or a decrease in the amount of net income. A decrease in the balance of retained earnings. An increase or a decrease in the par amount per share.

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Business

Brendan Bush

4 May, 09:28

Treasury stock transactions might cause: Multiple Choice An increase in the balance of retained earnings. An increase or a decrease in the amount of net income. A decrease in the balance of retained earnings. An increase or a decrease in the par amount per share.

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Alicia Kent · Answer 1

A decrease in the balance of retained earnings.

Explanation:

Treasury stock transactions might cause: A decrease in the balance of retained earnings.

Treasury stocks refer to a transaction of redemption of shares. which is when a company buys back its own shares. This transaction leads to a reduction in the number of shares reported in the balance sheet and also retained earnings.

The logic is that the company would have to use its own retained earnings to buy back its own shares.

This explains why treasury stock is subtracted from shareholders equity of which retained earnings is part, in the balance sheet.