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Treasury stock carried in the Equity section as a contra-equity account reflects the price paid for...

Treasury stock carried in the Equity section as a contra-equity account reflects the price paid for the common stock repurchased. The account is said to report this as a _________ measure. This means that the measure is fixed at the acquisition price paid for the stock and does not vary with each reporting date so long as the Common Stock is held for reissuance.

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COST METHOD

Treasury stock carried in the Equity section as a contra-equity account reflects the price paid for the common stock repurchased. The account is said to report this as a COST METHOD measure. This means that the measure is fixed at the acquisition price paid for the stock and does not vary with each reporting date so long as the Common Stock is held for reissuance.

Under the cash method, at the time of the share repurchase, the treasury stock account is debited to decrease total shareholder's equity. The cash account is credited to record the expenditure of company cash. If the treasury stock is later resold, the cash account is increased through a debit and the treasury stock account is decreased, increasing total shareholder's equity, through a credit. In addition, a treasury paid-in capital account is either debited or credited depending on whether the stock was resold at a loss or a gain.

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