During 2007, Topeka Corporation entered into the following transactions:

Transaction #1 Interest on a certificate of deposit owned by Topeka was credited to Topekas investment account.

Transaction #2 Topeka sold 10,000 shares of common stock at $30 that had been repurchased by Topeka last year for $20.

Should Topeka recognize the results of these transactions as income on the income statement for the year ended December 31, 2007?

Interest earned on the CD is recognized as interest income. The gain on the sale of treasury stock is not reported on the income statement but is relected on the statement of changes in stockholders equity and on the balance sheet. The sale proceeds simply increase equity and increase cash.

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