Journal entry for reissuing treasury stock

Under the cost method, the purchase of treasury stock is viewed as a temporary reduction in stockholders equity, and purchases are recorded in a contra equity account to reduce owners equity.

Basics of accounting for treasury stock transactions - Accounting Guide | belucydyret.web.fc2.com

Unlike the cost method of accounting for treasury stock, the par value method assumes that the treasury shares acquired will eventually be retired. This is accomplished by debiting treasury stock at the par value for the issued stock, the additional contributed capital account at the original amount received in excess of par, and crediting cash. The difference debited to retained earnings is considered a dividend to retiring stockholders, as the par value assumes the retirement of the stock.

The effect on the accounting balance sheet from the par value method of accounting for treasury stock is as follows:. The difference is that the par value method reduces the equity accounts directly, though preserving the distinction of treasury shares until actually retired, whereas the cost method temporarily reduces stockholders equity through a the complete idiots guide to foreign currency trading download equity account listed separately on the balance sheet.

The temporary reduction through the contra equity account is eliminated when the company reissues the shares under the cost method.

When the company reissues the treasury stock, Sunny debits cash for the journal entry for reissuing treasury stock, credits treasury stock for the original par value of the reissued shares, and credits contributed capital for the excess of cash proceeds over the original par value.

This transaction is very similar to issuing original stock, except the common stock at par is replaced with treasury shares.

Journal entry for reissuing treasury stock the above transactions, the equity section of forex online signal trading tutorials balance sheet for Sunny Sunglasses Shop now appears as follows:. The forex club china equity section equals the same amount as the balance when using the cost method.

How to Account for Share Buy Back: 7 Steps (with Pictures)

The difference is that the treasury stock balance is deducted directly from the par value of the original stock, consistent with the ludacris money maker free download that acquisition of treasury stock under the par value method is the same as retiring the shares. Similarly, contributed capital was also reduced by the original amount of capital of treasury shares in excess of par, and increased by any amount over par upon reissuing the treasury shares.

Treasury stock - par value method - Accounting For Management

The par value method uses the treasury stock account to make the distinction between actual retired shares and treasury shares outstanding.

When the company retires the treasury shares, the treasury stock is eliminated and the common stock account is reduced directly.

Back from Accounting for Treasury Stock: Par Value Method to Accounting for Treasury Shares: Back to the Treasury Stock Main Page. Back to the Accounting Terms Main Page. You may use these HTML tags and attributes: September 14, at 6: February 28, at 5: Leave a Reply Cancel reply Your Comment You may use these HTML tags and attributes: There are mainly two methods of accounting for treasury shares: This section discusses the par value method.

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