Question

Treasury Stock Transactions

Mystic Lake Inc. bottles and distributes spring water. On July 9 of the current year, Mystic Lake reacquired 5,200 shares of its common stock at $53 per share. On September 22, Mystic Lake sold 3,600 of the reacquired shares at $59 per share. The remaining 1,600 shares were sold at $50 per share on November 23.

a. Journalize the transactions of July 9, September 22, and November 23. If an amount box does not require an entry, leave it blank.

July 9

Sept. 22

Nov. 23

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 Mystic Lake Inc. have purchased the treasury stock?

Answer 1

a
July 9	Treasury Stock	275600		=5200*53
	Cash		275600
Sept. 22	Cash	212400		=3600*59
	Treasury Stock		190800	=3600*53
	Paid- in capital from sale of Treasury Stock		21600
Nov. 23	Cash	80000		=1600*50
	Paid- in capital from sale of Treasury Stock	4800
	Treasury Stock		84800	=1600*53
b
	Balance in Paid-In Capital from Sale of Treasury Stock	16800	Credit	=21600-4800

c

The reasons for purchase of treasury stock include all these reasons:

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.