Treasury Stock TransactionsYou Cant Lose! The following is adapted from an article appearing in Forbes: The board of Hospital Corporation of America (HCA) authorized the buyback of 12 million of the firms own shares at a total cost of $564 million. However, after the stock market crash of 1987, HCAs shares were trading at only 31 1/8. So, HCA was now out $190.5 million on its investmentright? Common sense would answer yes, but beyond common sense lurks the logic of accounting. According to generally accepted accounting principles, HCA didnt lose a penny on the buyback. Call it a no-risk investment. In this era of stock market volatility, stock buybacks offer firms the opportunity to tell shareholders that they have a terrific investmentwithout ever having to own up to the bad news if it turns sour.

Consider the scenario given in the case evaluate the reasonableness of the accounting for treasury stocks transactions?