Contrast the cost method and the par value method

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Reference no: EM131216260

Accounting for Treasury Stocks For numerous reasons, a corporation may reacquire shares of its own capital stock. When a company purchases treasury stock, it has two options as to how to account for the shares: the cost method and the par value method. Required: Compare and contrast the cost method and the par value method for each of the following:

a. Purchase of shares at a price less than par value

b. Purchase of shares at a price greater than par value

c. Subsequent resale of treasury shares at a price less than purchase price but more than par value

d. Subsequent resale of treasury shares at a price greater than both purchase price and par value

e. Effect on net income

Reference no: EM131216260

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