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Good afternoon. This is a pretty simple accounting transaction
. You would debit treasury stock for the price, and credit
cash for the same amount. Treasury stock is not treated as an asset
, because a company cannot legally invest in its own stock. Rather, treasury stock is presented on the balance sheet, where it reduces the total amount of owner's equity. Once the company buys its own stock, the treasury stock balance will need to be reported on the balance sheet. The common stock line item should remain the same, but you will want to footnote this with the number of shares issued and outstanding (as these amounts will now be different). The "treasury stock" line item should be added at the bottom of the Stockholder's Equity section, where it will compensate for the overstatement in the common stock balance.
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