Question

Treasury Stock Transactions

SprayCo Inc. develops and produces spraying equipment for lawn maintenance and industrial uses. On March 9 of the current year, SprayCo reacquired 12,900 shares of its common stock at $26 per share. On June 9, 8,100 of the reacquired shares were sold at $28 per share, and on November 13, 3,100 of the reacquired shares were sold at $28.

a. Journalize the transactions of March 9, June 9, and November 13. If an amount box does not require an entry, leave it blank.

Mar. 9
June 9
Nov. 13

b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?
$

c. What is the balance in Treasury Stock on December 31 of the current year?
$

d. How will the balance in Treasury Stock be reported on the balance sheet?

Answer 1

Answer

a.

Date	Particulars	Dr. $	Cr. $
9-Mar	Treasury Stock (12,900 Shares * $26)	335,400
	Cash /Bank		335,400
	(Being 12,900 own shares purchased)
9-Jun	Bank /Cash (8,100 Shares * $28)	226,800
	Treasury Stock (8,100 Shares * $26)		210,600
	Paid-in-Capital -- Treasury Stock (8,100 Shares * $2)		16,200
	(Being treasury stock sold at $2 premium)
13-Nov	Bank /Cash (3,100 Shares * $28)	86,800
	Treasury Stock (3,100 Shares * $26)		80,600
	Paid-in-Capital -- Treasury Stock (3,100 Shares * $2)		6,200
	(Being treasury stock sold at $2 premium)

b.

Dec 31 Paid in capital Balance = $22,400 ($16,200 + 6,200)

c.

Treasury Shares on Dec 31 = 1,700 Shares (12,900 Shares – 8,100 – 3,100)

Treasury Stock Balance = Purchase price * Treasury Shares on Dec 31

Treasury Stock Balance = $44,200 (1,700 Shares * $26)

d.

It will be reported in Shareholder’s Equity Section in the Balance Sheet as Negative Item

I.e. It will be deducted while calculating Total Shareholder’s Equity of the Company.

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