Question

Lava Lake Inc. bottles and distributes spring water. On February 11 of the current year, Lava Lake reacquired 6,000 shares of its common stock at $74 per share. On April 30, Lava Lake Inc. sold 4,200 of the reacquired shares at $80 per share. On August 22, Lava Lake Inc. sold 1,800 shares at $70 per share.

a. Journalize the transactions of February 11, April 30, and August 22. For a compound transaction, if an amount box does not require an entry, leave it blank.

Feb. 11
Apr. 30
Aug. 22

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

c. For what reasons might Lava Lake have purchased the treasury stock?

Answer 1

a
Feb 11	Treasury Stock	444000		=6000*74
	Cash		444000
Apr 30	Cash	336000		=4200*80
	Treasury Stock		310800	=4200*74
	Paid in Capital from sale of Treasury Stock		25200
Aug 22	Cash	126000		=1800*70
	Paid in Capital from sale of Treasury Stock	7200
	Treasury Stock		133200	=1800*74
b
	Paid-In Capital from Sale of Treasury Stock	18000	Credit	=25200-7200
c
	Reasons for purchase of Treasury Stock:
	For reissuance to employees as a bonus according to stock purchase agreements
	To support the market price of the stock
	To provide shares for resale to employees