Treasury stock

Question 1

Cost Method

Answer 1

debits the treasury stock account at cost. Reissued at same cost. Common stock is not reduced. Treasury stock is a contra equity account.

Question 2

Par Method

Answer 2

debits the treasury stock account at par. Reduces common stock APIC. Treasury stock APIC is the plug again.

Question 3

Cost Method JE

Answer 3

Purchase: debit Treasury stock, Credit cash
Re issuance: Debit cash, Credit treasury stock, Credit treasury stock additional paid in capital if the re issuance price is greater than the purchase price. APIC is not considered income. FIFO cost is used for reissuance if the question doesn’t say to use the average.

Question 4

Cost Method Reissuance at a loss

Answer 4

Debit the treasury paid in capital until zero and any additional is a debit to retained earnings.

Question 5

Impact on total owners equity

Answer 5

Is simply the amount of cash paid for the treasury stock.

Question 6

Par Method JE

Answer 6

Purchase
debit: Treasury stock, APIC common stock
credit: Cash, plug APIC treasury stock for the remainder.
Reissue: Debit cash
Credit: treasury stock, APIC common stock

Question 7

When treasury stock is retired

Answer 7

the common stock account is reduced by the par value.