Can a company record gains and losses from buying and reselling their own stock?
The answer to that question is 100% a no. When a company reacquires outstanding stock, this is known as treasury stock. A company cannot recognize any gain or loss in the income statement from buying or reselling their own stock.
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What is treasury stock?
Treasury stock represents stock that was outstanding stock and was reacquired by the company. Treasury stock reduces the number of shares outstanding.
What is the difference between authorized and issued stock?
Authorized stock is the max amount of stock/shares that a company can issue to employees, issue to the general public, or hold as treasury stock. Issued stock will always be equal to or less than authorized stock.
When a company repurchases outstanding common stock, where would the repurchase cost be recorded in the cash flow statement?
When a company repurchased or reacquires their own common stock, that represents a cash outflow. That stock would now be considered treasury stock since the company owns their own stock (reduces the equity owned by shareholders). Any purchase of treasury stock or subsequent reissuance would be recorded in the financing section of the cash flow […]