If a company purchases treasury stock and reissues it at a sales price lower than the repurchase cost, how is the difference recorded?

When a company repurchases its own shares (treasury stock) and subsequently reissues them at a price lower than the cost at which they were repurchased, the difference between the repurchase price and the resale price must be accounted for.

In this case, the amount by which the reissue price is lower than the repurchase cost is debited to paid-in capital. This is because treasury stock is recorded at cost when it is purchased, and any loss on the resale of this stock reduces the equity associated with the paid-in capital. The amount debited to paid-in capital reflects the adjustment needed to account for this difference in the equity section of the balance sheet, specifically from the accounts related to additional paid-in capital.

This treatment maintains the integrity of the company's equity accounts, ensuring that the total capital contributed by investors is accurately represented while recognizing the financial impact of the treasury stock transaction.