Treasury stock.For numerous reasons, a corporation may reacquire shares of its own capital stock. When a company purchases treasury stock, it usually accounts for the stock using the cost method.
InstructionsExplain how a company would account for each of the following:1. Purchase of treasury shares at a price less than par value.2. Subsequent resale of treasury shares at a price less than purchase price, but more than par value.3. Subsequent resale of treasury shares at a price greater than both purchase price and par value.4. Effect on net income.

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The Answer of Treasury stock.For numerous reasons, a corporation may reacquire shares of its own capital stock. When a company purchases treasury stock, it usually accounts for the stock using the cost method.
InstructionsExplain how a company would account for each of the following:1. Purchase of treasury shares at a price less than par value.2. Subsequent resale of treasury shares at a price less than purchase price, but more than par value.3. Subsequent resale of treasury shares at a price greater than both purchase price and par value.4. Effect on net income.

Treasury Stock