Question

Lawn Spray Inc. develops and produces spraying equipment for lawn maintenance and industrial uses. On January 31 of the current year, Lawn Spray Inc. reacquired 19,900 shares of its common stock at $19 per share. On June 14, 13,500 of the reacquired shares were sold at $24 per share, and on November 23, 5, 100 of the reacquired shares were sold at $20. Required: A. Journalize the transactions of January 31, June 14, and November 23. Refer to the Chart of Accounts for exact wording of account titles. B. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year? C. What is the balance in Treasury Stock on December 31 of the current year? D. How will the balance in Treasury Stock be reported on the balance sheet?

Answer 1

Answer to Question A:

Question A Date Account Name Debit Credit Treasury Stock 31-Jan (19,900 x $19) $ 378,100 Cash $ 378,100 (To record purchase of own stock - 19,900 shares for $ 19 each) Cash 22-Apr (13,500 X $24) $ 324,000 Paid in Capital from Sale of Treasury Stock $ 67,500 Treasury Stock (13,500 X $19) $ 256,500 (To record sale of treasury stock 13,500 shares at $24 each, which was reacquired at $19) Calculation of Paid in Capital from Sale of Treasury Stock amount: e Paid in Capital from Sale of Treasury Stock = ($24 - $19) X 13,500 Paid in Capital from Sale of Treasury Stock = $67,500 2 - Cash 23-Nov (5,100 X $20) $ 102,000 Paid in Capital from Sale of Treasury Stock $ 5,100 Treasury Stock (5,100 x $19) $ 96,900 (To record sale of treasury stock 5,100 shares at $20 each, which was reacquired at $19) Calculation of Paid in Capital from Sale of Treasury Stock amount: Paid in Capital from Sale of Treasury Stock = ($20 - $19) X 5,100 Paid in Capital from Sale of Treasury Stock = $5,100

Answer to Question B, C and D:

Question B Paid in Capital from Sale of Treasury Stock = $67,500 + $5,100 Balance in Paid in Capital from Sale of Treasury Stock as on 31st December = $72,600 Question Balance in Treasury Stock on December 31 = $378,100 - $256,500 - $96,900 Balance in Treasury Stock on December 31 = $24,700 Question D The balance in treasury stock will be shown as a subtraction when calculating shareholders equity.