Asked Dec 19, 2019

The treasury stock in Discussion Question 7 is resold for $3,750,000.
a. What is the effect on the corporation’s revenue of the period?
b. What is the effect on stockholders’ equity?


Expert Answer

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Treasury Stock Treasury stock refers to the stock that a company repurchases its own issued stock to serve some specific purposes like gifting it to the employees, issue stock bonus or to support the market price of the stock.

Step 2




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When the repurchased stock of $3,000,000 is resold at $3,750,000, the transaction is recorded as debit cash for $3,750,000 and credit Treasury Stock for $3,000,000 and credit Paid-in-capital from sale of Treasury Stock for $750,000. Thus in no way revenue of the corporation is affected by this transaction.


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