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  • Treasury Shares Notes

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    Elainea Chaleine
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    When a company reacquires its own shares and later sells them at a higher price, a gain on treasury shares results. To record this gain, cash is debited for the amount received from the sale and treasury stock is credited for the original cost of the shares sold, with the difference credited to gain on sale of treasury stock. An example journal entry is provided to illustrate debiting cash for $12,500, crediting treasury stock for its original $10,000 cost, and crediting $2,500 to gain on sale of treasury stock for the 500 shares sold above their cost.

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    When a company reacquires its own shares and later sells them at a higher price, a gain on treasury shares results. To record this gain, cash is debited for the amount received from the sale and treasury stock is credited for the original cost of the shares sold, with the difference credited to gain on sale of treasury stock. An example journal entry is provided to illustrate debiting cash for $12,500, crediting treasury stock for its original $10,000 cost, and crediting $2,500 to gain on sale of treasury stock for the 500 shares sold above their cost.

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    31 views1 page

    Treasury Shares Notes

    Uploaded by

    Elainea Chaleine
    When a company reacquires its own shares and later sells them at a higher price, a gain on treasury shares results. To record this gain, cash is debited for the amount received from the sale and treasury stock is credited for the original cost of the shares sold, with the difference credited to gain on sale of treasury stock. An example journal entry is provided to illustrate debiting cash for $12,500, crediting treasury stock for its original $10,000 cost, and crediting $2,500 to gain on sale of treasury stock for the 500 shares sold above their cost.

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    © All Rights Reserved
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    Treasury Shares notes:

    When a company reacquires its own shares and holds them in treasury,
    any subsequent sale of these shares at a higher price than the cost of
    their acquisition results in a gain on treasury shares.
    To record a gain on treasury shares, the following journal entry is
    typically used:
    Debit: Cash (amount received from sale of treasury shares)
    Credit: Treasury Stock (cost of treasury shares sold)
    Credit: Gain on Sale of Treasury Stock (difference between cash
    received and cost of treasury shares sold)
    Here's an example to illustrate the journal entry:
    Suppose a company reacquires 1,000 shares of its common stock at a
    cost of $20 per share, for a total of $20,000. Later on, the company sells
    500 of these shares at $25 per share, for a total of $12,500.
    The journal entry to record the gain on the sale of treasury shares would
    be:
    Debit: Cash - $12,500
    Credit: Treasury Stock - $10,000 (500 shares x $20 per share)
    Credit: Gain on Sale of Treasury Stock - $2,500 (500 shares x [$25 per
    share - $20 per share])

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