Discuss what if anything should be recognized in the 1231201

Discuss what (if anything) should be recognized in the 12/31/2017 financial statements. Include in your discussion the relevant GAAP concept(s). Event On October 16, 2017, Mune Company purchased back its own stock. It recorded $1,000,000 as treasury stock on its balance sheet. As of December 31, 2017, (Mune\'s year-end for financial reporting purposes), the company\'s stock price is 15% more than it was in October.

Solution

1.On October 16, 2017 ,When company purchases its own stock(Cost method)

The entry is simply a debit to treasury stock - a contra equity account (that is to say it is deducted from stockholders\' equity) - and a credit to cash.

Treasury stock account debit $1,000,000

Cash account credit $1,000,000

2.On Dec 31,2017, when share price has increased by 15% more

On Dec 31,2017 Treasury Stock should be carried on the balance sheet at historical cost only.(that is $1,000,000)

Some think that it should reflect the market value of the company\'s shares as, theoretically, the company could sell them on the open market or use them to buy other firms, converting them back into cash or productive assets. This thinking has yet to prevail.