Concept Introduction:
Treasury stock is the shares bought back by the company itself. A company may purchase its own shares and the shares bought back are called treasury stock. The
- For Purchase of treasury stock:
Treasury stock account is debited and cash account is credited with the cost of treasury stock purchased.
- For Sale / Reissuance of treasury stock:
Cash account is debited for the amount received on sale of treasury stock and the Treasury stock account is credited with the cost of treasury stock. For the difference in cost and sale value, Additional Paid in Capital and
Retained earnings accounts are adjusted.
Requirement-a:
To Indicate:
Difference between the treasury stock and unissued stock
Concept Introduction:
Treasury stock:
Treasury stock is the shares bought back by the company itself. A company may purchase its own shares and the shares bought back are called treasury stock. The journal entries are made at the time of sale and purchase of treasury stock as follows:
- For Purchase of treasury stock:
Treasury stock account is debited and cash account is credited with the cost of treasury stock purchased.
- For Sale / Reissuance of treasury stock:
Cash account is debited for the amount received on sale of treasury stock and the Treasury stock account is credited with the cost of treasury stock. For the difference in cost and sale value, Additional Paid in Capital and Retained earnings accounts are adjusted.
Requirement-b:
To Indicate:
The presentation of the treasury stock on the
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Survey of Accounting (Accounting I)
- Which of the following items is considered to be a current asset? Common Stocks. Inventory. Bonds. Preferred Stocks. Retained Earnings.arrow_forward1. What is treasury stock and what type of account is it?arrow_forwardWhat is the difference between a Stock Account and in equity and Paid-in-Capital account? Are they DR or CR balances? What statement(s) do they appear on?arrow_forward
- What does mean "Marketable securities" in the current asset of a balance sheet?arrow_forwardWhere can authoritative IFRS be found related to dilutive securities, stock-based compensation, and earnings per share?arrow_forwardWhy dividends are not deductible?And what could be the order of priority regarding income and assets in terms of preferred or common stock?arrow_forward
- Which of the following item does not appear under the head ‘Reserves and Surplus’ in Balance Sheet a. General reserve b. Sinking Fund c. Unclaimed Dividend d. Securities Premiumarrow_forwardWhich of the following is not a method that may be used to account for treasury shares?a. Cost methodb. Par value methodc. Retained earnings methodd. Constructive retirement methodCarrow_forwardQ.7(a): What are extraordinary items? How are they shown on the income statement? Q.7(b): Give three examples of unusual or infrequent items that are disclosed separately. Define Stock Spilt.arrow_forward
- What is the effect on the accounting equation when a stock dividend is declared? What is the effect on the accounting equation when a stock dividend is distributed?arrow_forwardHow is treasury stock reported on the balance sheet? Select one: Investment Contra asset Current asset Reduction of stockholders' equityarrow_forwardState the assumption about the “boot” that is made in the treasury Stock Methodarrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub