Beaverhead Creek Inc. bottles and distributes spring water. On March 4 of the cu

Question

Beaverhead Creek Inc. bottles and distributes spring water. On March 4 of the current year, Beaverhead Creek reacquired 5,000 shares of its common stock at $90 per share. On August 7, Beaverhead Creek sold 3,500 of the reacquired shares at $100 per share. The remaining 1,500 shares were sold at $88 per share on November 29.

For a compound transaction, if an amount box does not require an entry, leave it blank.

a1. Journalize the transactions of March 4.
Account Debit Credit
Treasury Stock
Cash

a2. Journalize the transactions of August 7
Account Debit Credit
Cash
Treasury Stock
Paid-In Capital from Sale of Treasury Stock

a3. Journalize the transactions of November 29.

Account Debit Credit
Cash
Paid-IN Capital from Sale of treasury Stock
Treasury Stock

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 Beaverhead Creek have purchased the treasury stock?

Explanation / Answer

a1. Journalize the transactions of March 4.
Account                           Debit              Credit
Treasury Stock                $450,000
     Cash                                               $450,000
Acquired 5,000 common stock shares @ $90 per share.
_______________________________________________________
a2. Journalize the transactions of August 7
Account                                       Debit              Credit
Cash                                       $350,000
Treasury Stock                                            $245,000
Paid-In Capital from Sale of Treasury Stock    $105,000
Issued 3,500 Treasury stock shares at $100per share
_________________________________________________________
a3. Journalize the transactions of November 29.

Account                                                          Debit             Credit
Cash                                                           $132,000
Paid-IN Capital from Sale of treasury Stock       $3,000
Treasury Stock                                                                 $135,000
Issued 1,500 Treasury stock shares at $88 per share
___________________________________________________________

b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?
$105,000 - $3,000 = $102,000

c. For what reasons might Beaverhead Creek have purchased the treasury stock?
1) The death of a shareholder
2) The retirement of an employeewho holds shares in Beaverhead Creek
3) There might be a disagreement over the management of the companyand the dissident shareholder wishes to sell his shares.

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