Question

6.

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 18,000 shares of its common stock at $19 per share. On June 14, 13,500 of the reacquired shares were sold at $27 per share, and on November 23, 3,200 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?

7.

Biscayne Bay Water Inc. bottles and distributes spring water. On May 14 of the current year, Biscayne Bay Water Inc. reacquired 21,350 shares of its common stock at $65 per share. On September 6, Biscayne Bay Water Inc. sold 12,450 of the reacquired shares at $71 per share. The remaining 8,900 shares were sold at $62 per share on November 30.

Required:

A.	Journalize the transactions of May 14, September 6, and November 30. 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.	Where will the balance in Paid-In Capital from Sale of Treasury Stock be reported on the balance sheet?
D.	For what reasons might Biscayne Bay Water Inc. have purchased the treasury stock?

Answer 1

6)
a)	Journal Entries
	Date	Particulars					Debit	Credit
	Jan-31	Treasury Stock					$   3,42,000.00
		To Cash						$   3,42,000.00
		(18000 x $ 19)
	Jun-14	Cash					$   3,64,500.00		(13500 x $ 27)
		To Treasury Stock						$   2,56,500.00	(13500 x $ 19)
		To Paid-In Capital from Sale of Treasury Stock						$   1,08,000.00	(13500 x $ 8)
	Nov-23	Cash					$      64,000.00		(3200 x $ 20)
		To Treasury Stock						$      60,800.00	(3200 x $ 19)
		To Paid-In Capital from Sale of Treasury Stock						$         3,200.00	(3200 x $ 1)

b)	Balance in Paid-In Capital from Sale of Treasury Stock					$ 1,11,200.00	($ 108000 + $ 3200)
c)	Balance in Treasury Stock					$    24,700.00	($ 342000 - $ 256500 - $ 60800)
d)	The balance in the treasury stock account is reported as a deduction from the total of the paid-in
	capital and retained earnings.

7)
a)	Journal Entries
	Date	Particulars					Debit	Credit
	May-14	Treasury Stock					$ 13,87,750.00
		To Cash						$ 13,87,750.00
		(21350 x $ 65)
	Sep-06	Cash					$   8,83,950.00		(12450 x $ 71)
		To Treasury Stock						$   8,09,250.00	(12450 x $ 65)
		To Paid-In Capital from Sale of Treasury Stock						$      74,700.00	(12450 x $ 6)
	Nov-30	Cash					$   5,51,800.00		(8900 x $ 62)
		Paid-In Capital from Sale of Treasury Stock					$      26,700.00		(8900 x $ 3)
		To Treasury Stock						$   5,78,500.00	(8900 x $ 65)

b)	Balance in Paid-In Capital from Sale of Treasury Stock					$    48,000.00	($ 74700 - $ 26700)
c)	Under the head "Stockholder's Equity"
d)	Biscayne Bay Water Inc. may have purchased the stock to balance the market price
	of the stock, to resale them to employees, or for reissuance to employees
	as a bonus .