Treasury Stock Accounting Journal Entry Examples Help

Treasury Stock Accounting Journal Entry Examples, Concepts, Illustrations, Sample Help Online

 

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Meaning of the word Treasury stock

 
Treasury stock refers to those share which have been bought back by the issuing company itself. There are two methods of accounting for treasury stock. One is cost method and the other is par value method.Under the cost method, the purchase of treasury stock is debited to treasury stock account by the actual cost of purchase.
Under par value method, purchase of treasury stock is debited to treasury stock by the total par value of the shares. Cash account is credited by the original amount paid to purchase the treasury stock. Any additional paid-in capital or discount on capital relating to treasury shares is cancelled by a debit or credit respectively.
 

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Treasury Stock Accounting Journal Entry Examples Explanation

 
Let us understand the concept Treasury Stock Accounting Journal Entry with the help of an example.
Example:A company issued 10,000 shares of common stock of $5 par value and received $53,000 cash. The company then purchased back 900 shares out of those at $6 per share. The company then resold 500 shares from treasury stock at $6.50 per share.
 
Cash Dr. 53,000
Common Stock 50,000
Additional Paid-In Capital 3,000
(issue of common stock)
Treasury Stock Dr. 5,400
Cash 5,400
(Treasury Stock purchased)
 
Cash Dr. 3,250
Treasury Stock 3,000
Additional Paid-In Capital 250
(Treasury Stock resold)
 
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