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    jahubb's Avatar
    jahubb Posts: 27, Reputation: 1
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    #1

    Feb 4, 2008, 12:20 PM
    Treasury stock
    Can someone please tell me if I have figured this out correctly.
    On March 1, Joe's Bistro required 600 shares of common stock at $10 per share.
    Joe's Bistro sold all of the treasury shares on November 15 for $ 12 per share. The entry to record the sale on November 15 would include a credit to what account and for what amount?
    A. Gain on Sale of Treasury Stock, $1,200
    B. Common Stock, $ 7,200
    C. Cash, $ 6,000
    D. Treasury Stock, $ 6,000
    My answer is A. Gain on Sale of Treasury Stock, 1,200
    I've read the 2 paragaraphs in my book over and over, and went to a few sites to see if I can get more info. I need to know if I'm on the right track. Thanks
    Sorry I left this out:
    The stock holders' equity section of joe's Bistro's balance sheet on January 1 appeared as follows:
    Common Stock, $2 par, 2,000 shares
    Issued and outstanding 4,000
    Additional Paid in Capital - Common 1,600
    Retained earnings 5,400
    sharif thayar's Avatar
    sharif thayar Posts: 1, Reputation: 1
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    #2

    Apr 10, 2008, 07:36 AM
    How to account treasury shares?
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #3

    Apr 12, 2008, 05:44 PM
    Quote Originally Posted by sharif thayar
    how to account treasury shares?
    Please start your own new thread for your question.
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #4

    Apr 12, 2008, 05:51 PM
    The original entry was this:

    Dr. Treasury Stock 6000
    Cr. Cash 6000

    So you have 6000 sitting in the contra account Treasury Stock.

    When it's re-sold, you record the cash at what it's actually sold for. Then it must come out of the Treasury Stock account at the same amount it went in for. By that I mean the $10 per share. (In this case the entire 6000 because it was all sold. But if, say, only 100 shares were sold, then it would be $1000, i.e. $10 per share.) The difference is a premium account, which could be called by different names. So something like:

    Dr. Cash 7200
    Cr. Treasury Stock 6000
    Cr. Paid in Capital from Sale of T/S 1200

    The extra amount from the sale is not a "gain." It's additional capital. There's a difference. This isn't like an asset they're selling and getting a gain on. They're "selling" ownership in the company and raising capital by doing so. So they get more capital, not a "gain."

    Did you read somewhere that this was the case?
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