Question

Blue Moon Water Supply Inc. bottles and distributes spring water. On July 17 of the current year, Blue Moon Water Supply reacquired 6,700 shares of its common stock at $89 per share.

a. What is the balance of Treasury Stock on December 31 of the current year?
$

b. Where will the balance of Treasury Stock be reported on the balance sheet?

c. All of the following are reasons that Blue Moon Water Supply may have purchased the treasury stock except:
to support the market price of the stock

to provide shares for resale to employees

for reissuance to employees as a bonus according to stock purchase agreement

to increase assets

Answer 1

a.

Balance of Treasury Stock on December 31 of the current year

= Number of shares reaquired x Price per share

= 6,700 x $89

= $596,300

b.

The balance of Treasury Stock will be reported on the balance sheet in the stockholders'equity section and will be shown as a deduction from the total stockholders'equity.

c.

Assets do not increase on purchase of treasury stock. Therefore, "to increase assets"cannot be a reason for purchase of treasury stock.

The answer is to increase assets.