Stockholders' Equity

Question 1

What are the two methods of accounting for treasury stock?

Answer 1

1) Cost Method

2) Par Method

Question 2

Where do gains and losses get recognized for treasury stock transactions?

Answer 2

Gains and losses of treasury stock transactions DO NOT get recorded in income statement.

Gains and losses of treasury stock transactions get recorded in APIC.

Question 3

When do gains and losses get recognized for treasury stock transactions?

Answer 3

1) Under Cost Method - gains and losses get recognized in APIC upon reissuance of stock (LATER)
2) Under Par Method - gains and losses get recognized in APIC when you buy back stock (NOW)

Question 4

How to record original issue of stock using Cost Method for accounting for Treasury Stock?

Answer 4

10,000 shares at $10 par value common stock sold for $15

Dr: Cash 150,000
Cr: Common Stock 100,000
Cr: APIC - C/S 50,000

Question 5

How to record buy back of stock above issue price using Cost Method for accounting for Treasury Stock?

Answer 5

200 shares were repurchased for $20 per share

Dr: Treasury Stock 4,000 (20 x 200) *using cost
Cr: Cash 4,000

Question 6

How to record reissue above cost using Cost Method for accounting for Treasury Stock?

Answer 6

100 shares repurchased for $20 were resold for $22

Dr: Cash 2,200 (22 x 100)
Cr: Treasury Stock 2,000 (20 x 100) *using cost
Cr: APIC - T/S 200

Question 7

How to record reissue below cost using Cost Method for accounting for Treasury Stock?

Answer 7

100 shares repurchased for $20 were resold for $13

Dr: Cash 1,300 (13 x 100)
Dr: APIC - T/S 200
Dr: Retained Earnings 500
Cr: Treasury Stock 2,000 (20 x 100)

Question 8

If there is an excess of loss over APIC-T/S, what do you do?

Answer 8

The excess of loss over APIC - T/S goes to Retained Earnings

Question 9

How to record original issue of stock using Par Value Method for accounting for Treasury Stock?

Answer 9

10,000 shares at $10 par value common stock sold for $15

Dr: Cash 150,000
Cr: Common Stock 100,000
Cr: APIC - C/S 50,000

Question 10

How to record buy back of stock above issue price using Par Value Method for accounting for Treasury Stock?

Answer 10

200 shares were repurchased for $20 per share

Dr: Treasury Stock 2,000 (10 x 200) *using par
Dr: APIC - C/S 1,000 (5 x 200) *using original APIC
Dr: Retained Earnings 1,000
Cr: Cash 4,000 (20 x 200)

Question 11

How to record buy back of stock below issue price using Par Value Method for accounting for Treasury Stock?

Answer 11

200 shares were repurchased for $12 per share

Dr: Treasury Stock 2,000 (10 x 200) *using par
Dr: APIC - C/S 1,000 (5 x 200)
Cr: Cash 2,400 (12 x 200)
Cr: APIC - T/S 600

Question 12

How to record reissue above cost using Par Value Method for accounting for Treasury Stock?

Answer 12

100 shares repurchased for $20 were resold for $22

Dr: Cash 2,200 (22 x 100)
Cr: Treasury Stock 1,000 (10 x 100) *using par
Cr: APIC - C/S 1,200

Question 13

How to record reissue below using Par Value Method for accounting for Treasury Stock?

Answer 13

100 share repurchased for $20 were resold for $13

Dr: Cash $1,300 (13 x 100)
Cr: Treasury Stock 1,000 (10 x 100)
Cr: APIC - C/S 300 (3 X 100)