Question

Treasury Stock Transactions

Biscayne Bay Water Inc. bottles and distributes spring water. On May 14 of the current year, Biscayne Bay Water Inc. reacquired 2,500 shares of its common stock at $71 per share. On September 6, Biscayne Bay Water Inc. sold 1,900 of the reacquired shares at $75 per share. The remaining 600 shares were sold at $67 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
Sept. 6
Nov. 30

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

Journal entries
date	Accounting titles & Explanations				Debit	Credit
14-May	Treasury stock				177500
	cash					177,500
	(2,500*71)
6-Sep	Cash		(1900*75)		142500
	Treasury stock		(1900*71)			134900
	paid in capital from sale of TS					7600
30-Nov	Cash		(600*67)		40200
	paid in capital from sale of TS				2400
	Treasury stock		(600*71)			42600
b)	Balance in paid in capital from sale of Treasury stock
	(7600-2400)=		5200	answer
			credit
c)	it will be reported under Paid- in capital
d)	A company may buy its own stock to provide shares for resale to employees.,for
	reissuing as a bonus to employees ,or for supporting the market price of
	stock.