EX 13-13 Treasury stock transactions

Biscayne Bay Water Inc. bottles and distributes spring water. On May 14 of the current year, Biscayne Bay Water Inc. reacquired 23,500 shares of its common stock at $75 per share. On September 6, Biscayne Bay Water Inc. sold 14,000 of the reacquired shares at $81 per share. The remaining 9,500 shares were sold at $72 per share on November 30.

a. Journalize the transactions of May 14, September 6, and November 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:

a. May 14 Treasury Stock (23,500 shares × $75) 1,762,500
Cash 1,762,500
Sept. 6 Cash (14,000 shares × $81) 1,134,000
Treasury Stock (14,000 shares × $75) 1,050,000
Paid-In Capital from Sale of Treasury
Stock [14,000 shares × ($81 – $75)] 84,000
Nov. 30 Cash (9,500 shares × $72) 684,000
Paid-In Capital from Sale of Treasury
Stock [9,500 shares × ($75 – $72)] 28,500
Treasury Stock (9,500 shares × $75) 712,500





b. $55,500 ($84,000 – $28,500) credit
c. Stockholders’ equity section
d. Biscayne Bay Water Inc. 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.