Question

A sale of treasury stock may result in a decrease in paid-in-capital. All decreases should be charged to the Paid-In-Capital from Sale of Treasury account.a. true b. false

Answer 1

b. false

Step-by-step explanation:

A loss making treasury stock sale will decrease the paid-in-capital account by the amount of loss only.

In case of Loss

Dr. Cr.

Cash xxx

Paid-In -Capital xxx

Treasury xxx

In case of Profit

Dr. Cr.

Cash xxx

Paid-In -Capital xxx

Treasury xxx

As Paid-In-Capital account is part of equity account and it has credit balance. Hence Paid-In-Capital balance will only be reduced in case of loss making treasury shares sale.