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Explain how treasury stock affects the stockholders’ equity section of the balance sheet and the impact...

Explain how treasury stock affects the stockholders’ equity section of the balance sheet and the impact on the calculation of earnings per share?

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Answer #1

Answer:-

●Treasury stock appears at cost or at par value in the shareholders equity section of the balance sheet and thus appears as a "negative" in the shareholders equity section (known as a contra equityaccount).

●If and when the company decides to resell treasury stock, there can be no income statement recognition of gains or losses on treasury stock transactions.

●If the company profits (or loses) from the resale of treasury shares, it simply records an increase in cash and a corresponding decrease in shareholders' equity.

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