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