Stockholders Equity

Question 1

In relation to stockholders equity, how should treasury stock be recorded?

Answer 1

Shares of it’s own stock held by a corporation should be recorded as treasury stock and shown as a reduction in the stockholders’ equity section of the B/S.

Question 2

How are cumulative preferred stock dividends paid?

Answer 2

Cumulative preferred stock dividends are paid on par value (not sales price) of preferred stock and have a preference over common stock dividends until all past preferred stock dividends are paid.

Question 3

Where are gains and losses of treasury stock recorded?

Answer 3

Gains and Losses of treasury stock are recorded by increasing APIC - Treasury Stock. Losses are recorded by first eliminating any balance in APIC - TS and then decreasing Retained Earnings.