regarding Wileys' this looks like you purchase the Tstock and immediatly retire? where as becker you have the tstock and decide to retire?

I think thats what the difference is as the J/E appear the same except for the credit to cash/tstock

That being said...

there are 2 methods in the purchase of treasury stock, that probably why there are 2 methods with the retirement (as there are 2 methods with the resale).

(Par and Cost Method)

Par purchase back and recognize Tstock at par, recognize gain loss immediatly.

Cost, carry tstock at aquistion cost and determine gain/loss when you resell the stock and beckers looks like you already have the tstock and decide to retire it....

that could also drive the difference but not 100% sure.  I say becker is correct because thats how I learned it :)

When treasury stock is retired, following 2 points to be referred:-

1. If price paid is in excess of par or stated value, that excess may be charged against either :-

• APIC - C/S, or
• Retained earnings

   2.  When the price paid is less than the par or stated value, the difference is credited to "APIC from treasury stock retirement"

It would also depend whether the treasury stock was acquired using cost or par value method. Then, our JEs would be different in both the cases.

• Assume, cost method:-

Par value of shares $10 each.They were orginally issued at $15 each. Thus, $5 is in APIC .

Treasury stock acquired 1000 shares for $20 each. No gain/loss recognized at the same time as it is cost method.

DR Treasury Stock 20,000

CR  Cash 20,000

Now, these 1000 shares are retired :-

DR Common Stock - par value ( 1000 X10) 10,000

DR APIC - excess issue price (1000X5) 5,000

DR Retained earnings - plug loss 5,000

CR Treasury stock - at cost 20,000

Ok, now let's assume another scenario in "cost method". Price paid to re-acquire the shares is $8 per share.

DR Treasury stock 8,000

CR Cash 8,000

In case retired,

DR Common Stock - par value ( 1000 X10) 10,000

DR APIC - excess issue price (1000X5) 5,000

CR Treasury stock - at cost 8,000

CR APIC from retirement of treasury stock 7,000

This explains both the entries as per Wiley and Becker if we are following cost method.             

• Assume, par value method:-

Par value of shares $10 each.They were orginally issued at $15 each. Thus, $5 is in APIC .

Treasury stock acquired 1000 shares for $20 each. Gain/loss to be recognized at the same time as it is par value method.

DR Treasury Stock (1000 X 10) 10,000

DR APIC - C/S (1000X5) 5,000

DR Retained earnings - plug loss 5,000

CR  Cash 20,000

Now, these 1000 shares are retired :-

DR Common Stock - par value ( 1000 X10) 10,000

CR Treasury stock - at par 10,000

Ok, now let's assume another scenario in "par value method". Price paid to re-acquire the shares is $8 per share.

DR Treasury stock (1,000 X 10) 10,000

DR APIC - C/S (1,000 X5) 5,000

CR Cash 8,000

CR APIC - T/S 7,000

In case retired,

DR Common Stock - par value ( 1000 X10) 10,000

CR Treasury stock - at par 10,000

It's important to understand that which APIC is from original issue of stock, which is from re-acquiring and which is from retirement.

In 2nd entry as per Becker, they didn't specify this...

May be by now your confusion is cleared. Just in case for addl practice, do refer Pg. F7-52 & 53 in Homework Reading in Becker review....

Good Luck !

Thank you Divya for the explanation on retirement of stock!

To cpanet administrators: is there any prize we can send to Divya for all the help she provides? :)