Selling Treasury Stock from the Treasury

Brian Krogol
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Alright, so we have previously repurchased shares into our Treasury stock and now we're gonna sell them back to the public at a different price. So let's see what happens here. Previously the apartment depot repurchase 10,000 shares of 50 cent par value. Common stock at the current market price of $25. Now the apartment Depot will resell 5000 shares of its Treasury stock at a price of $30. Okay, so notice it's a different price here. Right? We bought it at 25 now we're selling it at 30. Okay, so clearly there's been an increase in the price First. Let's see what was the total amount in our Treasury stock? 10,000 shares. Just like we saw before times the $25 was $250,000. Right in the previous entry we had debited our Treasury stock account $250,000. But notice what happened now, we didn't sell all the shares that we had repurchased. Right? We had repurchased 10,000 shares but we're only selling 5000. How many of the shares are we selling? Well, if it had been some weird number, we would have had to do a calculation but we know it's half right, 5000 out of the 10,000 shares, we sold half 0.5 of our Treasury stock. Right? So if we had $250,000 in Treasury stock representing 10,000 shares. Well, we got rid of half of it. Right, so 250,000 times 0.5. What we actually sold? We got rid of 100 and 25,000 worth of the Treasury stock, Right? 125,000 should be the reduction to the Treasury stock account. But we sold it at a different price. Right? The cash we brought in is going to be a different number. Let's look at what the cash is that we brought in. The cash is going to be equal to the $30 selling price times the 5000 shares we sold. Right, we sold 5000 shares at $30. Well, that comes out to 150,000. So, notice what's happened here. The cash we brought in is different from the lowering of the Treasury stock account. Right, This is what's gonna come out of Treasury stock over here Because it was sitting at 250,000. We got rid of half of it. But we brought in more cash. So let's start making our journal entry here. We're gonna debit cash because we brought in cash of $150,000. And we're gonna credit Treasury stock For the $125,000 because we got rid of half of the Treasury stock. 125,000. So how do we make this balance with another $25,000 credit? We're not gonna take a gain. This isn't a game that goes to the income statement as if we had sold a piece of machinery or sold an investment, know when we're dealing with Treasury stock. What we do is we increase our equity through a pick. So we're gonna have an additional paid in capital is going to be the credit in this transaction. We don't want to take gains or losses onto our income statement from Treasury stock transactions. Um We're dealing with our own stock in our own company. So this is go directly to equity here. Okay, So instead of doing a gain or loss on the sale, we go straight to a pick for the difference. If this had been sold for less, Well, it would have been a reduction of a pick to balance this out. Right. If the cash had been less than the Treasury stock investment, we would have had to debit. Apec okay. To balance it out. So, what we saw in this transaction here, let me get out of the way to fill it out. We've had cash increase by 100 and 50,000. We had our equity increase for two of these, the Treasury stock, we got rid of Treasury stock. Right, So that's gonna increase our equity since that was a contra equity account. And then a pick increases our equity by another 25,000. So we stay balanced here are assets went up by 100 and 50,000 and our equity went up by 100 and 50,000. Cool, Alright. So Treasury stock is not so complicated. You just have to, The toughest thing here is usually that you're gonna sell back a different number of shares than you purchased. So you have to see what is the proportion of our original purchase that we actually sold right in this, in case we sold half of that original investment, you might sell 60% of the investment 70% right. Whatever it is, you want to make sure that you get rid of the correct amount in the Treasury stock account. Right? Because at this at this point in time there's still a balance in Treasury stock. It's not the full 250,000 that we originally purchased. We got rid of half of it. So half that balance is still sitting as a debit balance in Treasury stock. Cool. Alright, let's go ahead and move on to the next video.