Treasury Stock - cost method

Question 1

When is gain/success or loss/failure recognized under cost method?

Answer 1

Reissued or retired

Question 2

Original Issue:

“10,000 shares, $10 par Common Stock sold for $15 per share”

Answer 2

Dr Cash 150,000
Cr. Common stock 100,000
Cr APIC - CS 50,000

Question 3

Buy back ABOVE issue price:

“200 shares repurchased for $20 per share”

Answer 3

Dr. Treasury Stock 4,000

Cr. Cash 4,000

Question 4

Reissue ABOVE cost:

“100 shares repurchased for $20 were resold for $22”

Answer 4

Dr. Cash 2,200
Cr. Treasury Stock 2,000
Cr. APIC - TS 200 [Gain 200]

Question 5

Reissue BELOW cost:

“100 shares repurchased for $20 were resold for $13”

Answer 5

Dr. Cash 1,300
Dr. APIC - TS 200
Dr. Retained Earnings 500
Cr. Treasury Stock 2,000

Question 6

Retire 1,000 shares:

Answer 6

Dr. Common Stock 10,000 [1000 X $10 par]
Dr. APIC - CS 5,000 [1000 X $5 excess over par]
Dr. Retained Earnings 5,000 [plug]
Cr. Treasury Stock 20,000 [1000 X $20 cost]