Corporations won stock that has been issued to shareholder and subsequently reacquired. T/S are not entitled to any of the rights of ownership given to common shareholders, such as the right to vote or right to receive dividends. There are two method: Cost method and Legal method
Difference:timing of gain/Loss recognized ot treasury stock transactions.
Timeline for treasury stock transactions:
- Issuance(price A)
- Repurchase(Price B)
- Reissuance(Price C)
Cost method: gain/Loss at reissuance(B-C)
Legal Method:Gain/Loss at repurchase (A-B)
Gain:recognized as APIC
Loss: charged to RE