Question

For numerous reasons, a corporation may reacquire shares of its own capital stock. When a company purchases treasury stock, it has two options as to how to account for the shares: the cost method and the par value method.

Required:
Compare and contrast the cost method and the par value method for each of the following:
a. Purchase of shares at a price less than par value
b. Purchase of shares at a price greater than par value
c. Subsequent resale of treasury shares at a price less than purchase price but more than par value
d. Subsequent resale of treasury shares at a price greater than both purchase price and par value
e. Effect on net income



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  • CreatedDecember 17, 2014
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