When stock of the company is purchased, treasury stock, three methods are available to record this transaction: the cost method, the par value method, and the constructive retirement method. Discuss the following:
1) The difference between the cost, par and constructive retirement method.
2) For the cost and par value methods, prepare journal entry examples of each using the following information:
a) 1000 shares of $5 par stock were sold for $7.
b) 500 shares were repurchased at a price of $6
c) The 500 shares were later sold for $3500
3) For the constructive retirement method prepare the following journal entry:
a) The shares were retired.