A is corrent. If the cost method is used to account for treasury stock, the sale of treasury stock above cost is recorded as follows:
B is incorrect since retained earnings would be affected only when treasury stock is sold below purchase value under the cost method. In this case, retained earnings would be debited, not credited.
C is incorrect because treasury stock is not a valuation account; each share of treasury stock is accounted for as an individual item and each share has the same value as before the transaction. However the total number of shares is reduced, thus reducing the value reported as treasury stock.
D is incorrect because equity transactions involving treasury stock never produce gains or losses.
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