FAR equity transactions: treasury stock, stock dividends, and stock issuance costs

The rules, one page each

1. Treasury Stock Cost Method: Reissue Above or Below CostDecision tree

   Remove reissued treasury shares at repurchase cost under the cost method. Differences never affect net income: credit APIC, treasury above cost; below cost, debit APIC, treasury to zero, then retained earnings for any remaining shortfall.

2. Treasury Stock Timeline: APIC, Retained Earnings, and RetirementTimeline

   Under the cost method, process reissues in order and update APIC from treasury stock each time. Reissue deficits and retirement costs above original issue proceeds use that available credit balance first, then retained earnings.

3. Stock dividends: small vs large, timing, and shares outstanding (exclude treasury)Contrasting cases

   Small stock dividends (about 20-25% or less) are measured at fair value on the declaration date; large stock dividends are measured at par. Use outstanding shares (exclude treasury). Debit retained earnings at declaration; reclassify to common stock (and APIC if small) when distributed.

4. Issuing stock: entries, direct issuance costs, and noncash issuancesWorked example

   Record common stock at par and APIC for the excess of consideration over par. Deduct direct and incremental share‑issuance costs from APIC. For noncash issuances, measure at the more clearly determinable fair value (typically the stock), and still reduce APIC for direct issuance costs.