Final answer:
It is true that a firm can record a loss from a treasury stock transaction if they sell the repurchased shares for less than the acquisition cost. Treasury stock transactions are recorded at cost and affect the balance sheet and retained earnings.
Step-by-step explanation:
True, it is possible for a firm to record a loss as a result of a treasury stock transaction. When a company buys back its own shares, known as treasury stock, those shares are recorded at cost. If these treasury shares are later sold for less than the cost at which they were acquired, the company realizes a loss.
Conversely, selling treasury stock for more than the repurchase cost results in gains. It is important to note that these transactions do not affect the income statement directly, but rather appear on the balance sheet and may impact retained earnings.