What is the primary accounting method for treasury stock that recognizes the original purchase cost?

The cost method is the primary accounting method for treasury stock that recognizes the original purchase cost. Under this method, when a company buys back its own shares, it records them at the cost paid for those shares, which includes any direct costs attributable to the acquisition. This approach provides a clear and straightforward way to account for treasury stock, as it reflects the actual cash outflow and the value of the investment made in the shares.

When treasury stock is eventually reissued or sold, the company will adjust the treasury stock account and recognize any gains or losses based on the difference between the reissue price and the original purchase cost. This method ensures that the financial statements accurately represent share repurchases and any impacts on shareholders' equity.

In contrast, other methods such as the par value method focus on maintaining a specific par value for shares rather than the cost incurred, while the market value method does not apply for accounting treasury stock since it is not reflective of the historical cost basis. The residual method, similarly, does not pertain to treasury stock accounting as it involves a different approach to recognizing the values associated with stock issuance and treasury stock transactions. Therefore, the cost method is the most appropriate and widely used method for accounting purposes in this context.