How should a "gain" from the sale of treasury stock be reflected when using the cost method of recording treasury stock transactions?

Question

Quizplus · Accepted Answer

When using the cost method of recording treasury stock transactions, the gain or loss from the sale of treasury stock should be reflected in the paid-in capital from treasury stock transactions account. This account represents the difference between the cost of acquiring the treasury stock and the proceeds received from selling it, so any gain or loss would affect this account. It is not reflected as ordinary earnings, an increase in the common stock or an extraordinary item on the income statement, as these accounts are not affected by treasury stock transactions, but by the company's operations and financing activities.

How Should a "Gain" from the Sale of Treasury Stock