Treasury Stock

Question 1

Can firms profit from Treasury Stock transactions?

Answer 1

-No

Question 2

Can Retained Earnings be increased by Treasury stock transactions?

Answer 2

-No never

Question 3

Describe the two methods of accounting for Treasury Stock.

Answer 3

• Cost Method: Dr. Treasury Stock at cost for acquisition, reissuance Cr. Treasury Stock and use Contributed Capital from Treasury Stock or Retained Earnings for difference in price
• Par Value Method: Dr. Treasury Stock for par value and Dr. original APIC, upon reissuance Cr. Treasury Stock