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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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What is the treasury stock method? How is the increase in the diluted earnings per share denominator determined under the treasury stock method?

To determine

Explain the treasury stock method and state the manner by which the increase in the diluted earnings per share denominator is determined under the treasury stock method.

Explanation

Treasury stock:

The shares which were reacquired or bought back by the company, but not formally retired from the corporation stock, are called as treasury stock. The re-acquisition of issued shares decreases the number of outstanding shares.

  • Treasury stock method determines the change in the number of shares for a corporation’s diluted earnings per share calculations when the corporation has share warrant and share options...

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