When treasury stock is resold for an amount less than its cost,the difference between the sales price and the cost is deducted from the Additional Paid-In Capital-Treasury Stock account or the Retained Earnings account (if the Additional Paid-In Capital-Treasury Stock account does not exist).

Question

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When treasury stock is resold for less than its cost, the difference is first deducted from any balance in the Additional Paid-In Capital-Treasury Stock account. If this account is insufficient or does not exist, the remaining difference is then deducted from Retained Earnings.

When Treasury Stock Is Resold for an Amount Less Than