Question

explain the entry to sell treasury stock at a loss

Answer 1

When a treasury stock are sold at a price less than its purchase price, the difference amount of loss is credited to paid in capital from treasury stock account, if there is any balance in paid in capital from treasury stock account. Entry would be recorded as follows:

Date	Account title	Debit	Credit
	Cash	xxx
	Paid in capital from treasury stock	xxx
	Treasury stock		xxx
	(To record the sale of treasury stock at loss)

When a treasury stock are sold at a price less than its purchase price, the difference amount of loss would be recorded in both retained earnings account and paid in capital from treasury stock account, when the entire loss cannot be absorbed by paid in capital from treasury stock account alone, due to less balance in paid in capital from treasury stock account. First, total balance of paid in capital from treasury stock account will be debited, then remaining unobserved loss will be recorded as credit to retained earnings as follows:

Date	Account title	Debit	Credit
	Cash	xxx
	Retained earnings	xxx
	Paid in capital from treasury stock	xxx
	Treasury stock		xxx
	(To record the sale of treasury stock at loss)

When a treasury stock are sold at a price less than its purchase price, the difference amount of loss is credited to retained earnings account, if there is $0 balance in paid in capital from treasury stock account. Entry would be recorded as follows:

Date	Account title	Debit	Credit
	Cash	xxx
	Retained earnings	xxx
	Treasury stock		xxx
	(To record the sale of treasury stock at loss)