Question

Treasury Stock Transactions

Biscayne Bay Water Inc. bottles and distributes spring water. On May 14 of the current year, Biscayne Bay Water reacquired 23,500 shares of its common stock at $75 per share. On September 6, Biscayne Bay Water sold 14,000 of the reacquired shares at $81 per share. The remaining 9,500 shares were sold at $72 per share on November 30.

a. Journalize the transactions of May 14, September 6, and November 30. For a compound transaction, if an amount box does not require an entry, leave it blank.

May 14	Treasury Stock
	Cash
Sept. 6	Cash
	Treasury Stock
	Paid-in Capital from Sale of Treasury Stock
Nov. 30	Cash
	Paid-in Capital from Sale of Treasury Stock
	Treasury Stock

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The repurchase of shares, known as treasury stock, is typically recorded using the cost method. When the treasury stock is resold, what is the company receiving? What is it giving up? Keep in mind the price paid to buy the treasury stock and the price the shares are resold for at a later date.

Learning Objective 5 Learning Objective 6.

b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?
$ Credit

c. Where will the balance in Paid-In Capital from Sale of Treasury Stock be reported on the balance sheet?
Stockholders' Equity section

d. For what reasons might Biscayne Bay Water Inc. have purchased the treasury stock?
All of these reasons.

Answer 1

a. Journalize the transactions of May 14, September 6, and November 30. For a compound transaction, if an amount box does not require an entry, leave it blank.

May 14	Treasury Stock (23500*75)	1762500
	Cash		1762500
Sept. 6	Cash (14000*81)	1134000
	Treasury Stock		1050000
	Paid-in Capital from Sale of Treasury Stock		84000
Nov. 30	Cash (9500*72)	684000
	Paid-in Capital from Sale of Treasury Stock	28500
	Treasury Stock (9500*75)		712500

b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?
$84000-28500 = 55500 Credit

c. Where will the balance in Paid-In Capital from Sale of Treasury Stock be reported on the balance sheet?
Stockholders' Equity section

d. For what reasons might Biscayne Bay Water Inc. have purchased the treasury stock?
All of these reasons.