ABC had 20,000 shares of treasury common stock, which it purchased for $7 per share.Until now, this was ABC's only treasury stock transaction.The shares were originally sold and issued at $5 per share.ABC uses the single-transaction method.ABC is now selling the treasury shares for $5 per share.The entry to record the resale would include a:

Question

Quizplus · Accepted Answer

The resale of treasury stock at a price lower than the purchase price results in a loss, which is debited to Retained Earnings. The loss is calculated as (Purchase price - Resale price) x Number of shares = ($7 - $5) x 20,000 = $40,000.

ABC Had 20,000 Shares of Treasury Common Stock, Which It