Treasury stock was acquired for cash at a price in excess of its par value. The treasury stock was subsequently reissued for cash at a price in excess of its acquisition price. Assuming that the cost method of accounting for treasury stock transactions is used, what is the effect on retained earnings?

Question

Jocelynn Gallagher

Business

13 October, 02:54

Treasury stock was acquired for cash at a price in excess of its par value. The treasury stock was subsequently reissued for cash at a price in excess of its acquisition price. Assuming that the cost method of accounting for treasury stock transactions is used, what is the effect on retained earnings?

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Armando Landry · Answer 1

null or zero. It has no impact on retained earnings.

Explanation:

The retained earnings account is not used underthe cost method for treasyry stocks.

the entries will be:

treasury stock debit

cash credit

to record the purchase

cash debit

treasury stock credit

additional paid. in TS credit

The retained earnings is not involve in the transactions.