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Discuss the propriety of showing: (a) Treasury stock as an asset. (b) Gain or loss on sale of treasury stock as additions to or deductions from income. (c) Dividends received on treasury stock as income.

Discuss the propriety of showing:

(a) Treasury stock as an asset.

(b) “Gain” or “loss” on sale of treasury stock as additions to or deductions from income.

(c) Dividends received on treasury stock as income.

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(a) Treasury stock should not be classified as an asset since a corporation cannot own itself.…View the full answer

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Related Book For answer-question
Intermediate Accounting

Intermediate Accounting

13th Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield

ISBN: 978-0470423684

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Treasury stock refers to shares of a company\'s own stock that the company has bought back from its shareholders and now holds as a form of asset on its balance sheet. When a company buys back its own stock, it reduces the number of outstanding shares in the market, which can potentially increase the value of the remaining shares. Treasury stock can be acquired through a variety of methods, such as open market purchases, negotiated transactions, or as a result of converting convertible securities. Companies may buy back their own shares for a number of reasons, including to return capital to shareholders, to signal confidence in the company\'s future, or to use the shares for employee stock option plans. While treasury stock does not pay dividends, it can be reissued by the company at a later time, which could dilute the value of the remaining shares. Companies are required to report their treasury stock holdings in their financial statements.

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