The account Paid-In Capital from Treasury Stock Transactions has a credit balance of $2,000.The corporation resells 450 shares of its treasury stock.These shares were acquired for $10 per share and sold for $3 per share.The entry to record the sale of treasury stock includes a debit to Retained Earnings of $3,150.

Question

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The entry to record the sale of treasury stock at a loss does not typically involve Retained Earnings directly. Instead, it would involve debiting Treasury Stock for the cost of the shares, crediting Cash for the proceeds from the sale, and if the sale results in a loss that exceeds the balance in Paid-In Capital from Treasury Stock Transactions (if any), then and only then might Retained Earnings be debited for the remaining loss. However, with the information provided, the calculation for a direct debit to Retained Earnings of $3,150 is not supported.

The Account Paid-In Capital from Treasury Stock Transactions Has a Credit