E 8-17 Treasury Stock Transactions Blue Moon Water Supply Inc. bottles and distr

Question

E 8-17 Treasury Stock Transactions Blue Moon Water Supply Inc. bottles and distributes spring water. On July 17 of the current year, Blue Moon Water Supply reacquired 35,000 shares of its common stock at $60 per share. a. What is the balance of Treasury Stock on December 31 of the current year? share easury Steck on December Si of the curs b. Where will the balance of Treasury Stock be reported on the balance sheet? In the stockholders' equity section as a reduction c. For what reasons Blue Moon Water Supply may have purchased the treasury stock 2

Explanation / Answer

Ans:

Treasury stock transactions means purchase of outstanding shares of its own stock by a company.which is also called as buy back of shares.

a) Treasury stock balance = 35000 * $60

= $2,100,000

b) Under stockholders equity section as reduction from the equity.

c) The reasons for purchase of treasury stock

1) owneship consolidation

2) In order to decrease the supply when shares are under valued.

3) returning excess cash to the share holders

4) To boost financial ratios of the company

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