EX 13-11 Treasury stock transactions

Crystal Lake Inc. bottles and distributes spring water. On March 4 of the current year, Crystal Lake reacquired 33,000 shares of its common stock at $84 per share. On August 27, Crystal Lake Inc. sold 25,000 of the reacquired shares at $90 per share. The remaining 8,000 shares were sold at $80 per share on November 11.

a. Journalize the transactions of March 4, August 27, and November 11.
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 Crystal Lake have purchased the treasury stock?


Answer:

a. Mar. 4 Treasury Stock (33,000 shares × $84) 2,772,000
Cash 2,772,000
Aug. 27 Cash (25,000 shares × $90) 2,250,000
Treasury Stock (25,000 shares × $84) 2,100,000
Paid-In Capital from Sale of Treasury
Stock [25,000 shares × ($90 – $84)] 150,000
Nov. 11 Cash (8,000 shares × $80) 640,000
Paid-In Capital from Sale of Treasury
Stock [8,000 shares × ($84 – $80)] 32,000
Treasury Stock (8,000 shares × $84) 672,000





b. $118,000 ($150,000 – $32,000) credit

c. Crystal Lake may have purchased the stock to support the market price of the stock, to provide shares for resale to employees, or for reissuance to employees as a bonus according to stock purchase agreements.