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Chapter 13: Q11RQ (page 707)

Where and how is treasury stock reported on the balance sheet?

Short Answer

Expert verified

Recording treasury stock under the cost method, the cost of treasury stock is recorded at the end of the section Stockholders' Equity of the balance sheet. Treasury stock will be reduced from the value in Stockholders' Equity.

Step by step solution

01

Introduction to the topic

Treasury stock is the previously outstanding stock that has been bought back and is being held by the issuing corporate.

02

Treasury stock reported on the balance sheet

The two methods of recording treasury stock are the cost and par value methods. Treasury stock is recorded in the shareholders' equity section of the balance sheet of a corporate.

Treasury stock is a contra equity account that addresses the number of shares bought back from the open market; it decreases shareholders' equity by the sum paid for the stock.

Stockholders' Equity

Preferred stock

xxx

Common stock

xxx

Retained Earnings

xxx

Less: Treasury stock

(xxx)

Total Stockholders' Equity

xxx

Therefore, the treasury stock value is deducted from the retained earnings to calculate the total stockholders’ equity under the stockholders’ equity section.

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Most popular questions from this chapter

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Following is a list of advantages and disadvantages of the corporate form of business. Identify each quality as either an advantage or a disadvantage.

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Question: Journalizing issuance of stock—at par and at a premium

Colorado Corporation has two classes of stock: common, \(3 par value; and preferred, \)30 par value.

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What does earnings per share report, and how is it calculated?

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Rocket Corp. earned net income of \(153,040 and paid the minimum dividend to preferred stockholders for 2018. Assume that there are no changes in common shares outstanding during 2018. Rocket’s books include the following figures:

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issued, 46,700 shares outstanding 240,000

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1. Compute Rocket’s EPS for the year.

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