Under the par value method of accounting for treasury stock, the treasury stock is reported on the balance sheet as a deduction from
A)the sum of contributed capital, unrealized capital, and retained earnings
B)retained earnings
C)capital stock
D)contributed capital

Question

Quizplus · Accepted Answer

Under the par value method of accounting for treasury stock, the treasury stock is reported on the balance sheet as a deduction from Capital Stock. This is because, in the par value method, the treasury stock is recorded at cost, and when it is subsequently resold, it is recorded as an increase in capital stock at the par value per share. Therefore, deducting the treasury stock from capital stock is a more accurate representation of the company's actual capital structure.

Under the Par Value Method of Accounting for Treasury Stock