Some accountants suggest that Treasury stock should be reported as an asset because it can be sold for cash. According to the text, why is Treasury stock not reported as an asset? Also, when Treasury stock is sold at a gain or a loss, why is this gain or loss not shown in the Income Statement? Where is Treasury stock shown instead and why?
Treasury stock is not shown as an asset because it reduces stockholder claims on corporate assets. Gains or losses in treasury stock are not shown on the income statement because gains only happen when assets are sold and treasury stock is not an asset. Also, corporations do not recognized gains or losses with stockholders gains and losses. Treasury stock gains are shown on the balance sheet separately under paid in capital.