Treasury Stock Transactions Biscayne Bay Water Inc. bottles and distributes spri
ID: 2530374 • Letter: T
Question
Treasury Stock Transactions
Biscayne Bay Water Inc. bottles and distributes spring water. On May 14 of the current year, Biscayne Bay Water Inc. reacquired 2,700 shares of its common stock at $48 per share. On September 6, Biscayne Bay Water Inc. sold 2,000 of the reacquired shares at $51 per share. The remaining 700 shares were sold at $45 per share on November 30.
a. Journalize the transactions of May 14, September 6, and November 30. For a compound transaction, if an amount box does not require an entry, leave it blank.
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?
Explanation / Answer
Biscayne Bay Water Inc
Date
Account Titles and Explanation
Debit
Credit
14-May
Treasury Stock
$129,600
Cash
$129,600
(To record reacquisition of 2,700 shares at $48 per share)
6-Sep
Cash
$102,000
Paid-in Capital, Treasury Stock
$6,000
Treasury Stock
$96,000
(To record sale of 2,000 shares of treasury stock at $51 per share; paid-in capital - $3 (51 -48) x 2,000 = $6,000 and Treasury stock = 2,000 x $48 = $96,000)
30-Nov
Cash
$31,500
Paid-in Capital, Treasury Stock
$2,100
Treasury Stock
$33,600
(To record sale of 700 shares of treasury stock at $45 per share; paid-in capital - $3 (48-45) x 700 = $2,100 and Treasury stock = 700 x $48 = $33,600)
Paid-in Capital as on September 6 = $6,000
(excess of sale price over cost price, $51 -$48 = $3) 2,000 shares x $3 = 6,000
Less: Paid-in Capital from sale of 700 shares on Nov 30, = ($2,100)
(Excess of cost price over sale price, ($48 - $45 =$3) = 700 shares x $3 = ($2,100)
Balance in Paid-in Capital from sale of Treasury Stock on December 31 = 6,000 - $2,100 = $3,900
Date
Account Titles and Explanation
Debit
Credit
14-May
Treasury Stock
$129,600
Cash
$129,600
(To record reacquisition of 2,700 shares at $48 per share)
6-Sep
Cash
$102,000
Paid-in Capital, Treasury Stock
$6,000
Treasury Stock
$96,000
(To record sale of 2,000 shares of treasury stock at $51 per share; paid-in capital - $3 (51 -48) x 2,000 = $6,000 and Treasury stock = 2,000 x $48 = $96,000)
30-Nov
Cash
$31,500
Paid-in Capital, Treasury Stock
$2,100
Treasury Stock
$33,600
(To record sale of 700 shares of treasury stock at $45 per share; paid-in capital - $3 (48-45) x 700 = $2,100 and Treasury stock = 700 x $48 = $33,600)
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