Question

Mystic Lake Inc. bottles and distributes spring water. On July 9 of the current year, Mystic Lake reacquired 40,300 shares of its common stock at $42 per share. On September 22, Mystic Lake sold 32,400 of the reacquired shares at $49 per share. The remaining 7,900 shares were sold at $41 per share on November 23. Required: a. Journalize the transactions of July 9, September 22, 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. For what reasons might Mystic Lake Inc. have purchased the treasury stock?

a. Journalize the transactions of July 9, September 22, and November 23. Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8

Answer 1

Answer
Journal entry
Date	account and explanation	debit	credit
Jul-09	Treasury stock (40300*42)	$ 1,692,600
	Cash		$1,692,600
	(To record treasury stock)
Sep-22	Cash (32400*49)	$ 1,587,600
	Treasury stock (32400*42)		$1,360,800
	Paid in capital from sale of treasury stock		$   226,800
	(To record sale of treasury stock)
Nov-23	Cash (7900*41)	$    323,900
	Paid in capital from sale of treasury stock	$        7,900
	Treasury stock (7900*42)		$   331,800
	(To record sale of treasury stock)
B) Balance in Paid in capital from sale of treasury stock = 226800-7900 = $218900
c) Treasury stock is purchase because company wants to increase earning per share