Orion-Ch11
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Q 11.21: When treasury stock is sold below cost, which two accounts (other than cash) may be debited? A Retained Earnings and Common Stock. You got it wrong : B Retained Earnings and Treasury Stock. C Paid-in Capital from Treasury Stock and Treasury Stock. This is correct answer : D Paid-in Capital from Treasury Stock and Retained Earnings.
When treasury stock is sold below its cost, the Paid-in Capital from Treasury Stock account can be reduced to zero with a debit (it can never show a debit balance), and Retained Earnings will be debited for any remaining deficit.
