Tag Archives: asc 505

Treasury Stock, ASC 505

Treasury Stock
Entity’s own outstanding shares
–> repurchased by the entity

Presentation of treasury stock
Cost of treasury stock is not reported as an asset
Cost of treasury stock is reported as a deduction from “equity”

Gain or loss on sale of treasury stock
1. Gain is credited to “additional paid-in capital”

2. Loss is first charged to “previous gain” from sale of treasury stock of same class
–> The remaining loss is charged to “retained earnings”

 

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Stock Dividends, Stock Splits, ASC 505

Stock Dividends, Stock Splits
1. Issuance of new common shares
–> to the existing shareholders
 2. Without consideration
–> Recipients do not pay for new shares

Stock Dividends
1. Fair value of new shares issued is transferred
–> from retained earnings to capital stock and additional paid-in capital
2. The number of shares outstanding is adjusted.

Stock Splits
1. No transfer from retained earnings to capital stock
2. Only the number of shares outstanding is adjusted.

Issuance of additional shares of
–> less than 20% or 25% of existing outstanding shares
–> is generally treated as a “stock dividend”

Accounting for Recipients
1. “Total amount” of cost of shares does not change.
2. “Cost per share” is adjusted.

 

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