Accounting for Treasury Stocks For numerous reasons, a corporation may reacquire shares of its own capital stock. When a company purchases treasury stock, it has two options as to how to account for the shares: the cost method and the par value method. Required: Compare and contrast the cost method and the par value method for each of the following:
a. Purchase of shares at a price less than par value
b. Purchase of shares at a price greater than par value
c. Subsequent resale of treasury shares at a price less than purchase price but more than par value
d. Subsequent resale of treasury shares at a price greater than both purchase price and par value
e. Effect on net income