Treasury stock that was purchased for $3,000 is sold for $3,500. As a result of these two transactions combined
A) income will be increased by $500
B) stockholders' equity will be increased by $3,500
C) stockholders' equity will be increased by $500
D) stockholders' equity will not change

Question

Quizplus · Accepted Answer

When treasury stock is sold for more than its purchase price, the difference between the selling price and the purchase price is recorded as a gain in the stockholders' equity section of the balance sheet. In this case, the gain would be $500 ($3,500 - $3,000), which would increase stockholders' equity by $500. Income is not affected by this transaction.

Treasury Stock That Was Purchased for $3,000 Is Sold for $3,500