When a corporation sells treasury stock below its cost, it usually debits the difference between cost and selling price to Paid-in Capital from Treasury Stock.

Question

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When a corporation sells treasury stock below its cost, the difference between the cost and the selling price is indeed debited to Paid-in Capital from Treasury Stock, as this approach prevents the recognition of a loss in the income statement from a transaction with its own shareholders.

When a Corporation Sells Treasury Stock Below Its Cost, It