Question

Lawn Spray Inc. develops and produces spraying equipment for lawn maintenance and industrial uses. On January 31 of the current year, Lawn Spray Inc. reacquired 50,000 shares of its common stock at $51 per share. On June 14, 24,000 of the reacquired shares were sold at $60 per share, and on November 23, 18,000 of the reacquired shares were sold at $56.

a. Journalize the transactions of January 31, June 14, and November 23. For a compound transaction, if an amount box does not require an entry, leave it blank.

Jan. 31
June. 14
Nov. 23

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	Account	Debit	Credit
January 31	Treasury Stock [50,000 shares * $51]	2,550,000
	Cash		2,550,000
	[To record reacquisition of treasury stock]
June 14	Cash [24,000 shares * $60]	1,440,000
	Treasury Stock [24,000 shares * $51]		1,224,000
	Paid-In Capital from Sale of Treasury Stock		216,000
	[To record sales of treasury stock]
November 23	Cash [18,000 shares * $56]	1,008,000
	Treasury Stock [18,000 shares * $51]		918,000
	Paid-In Capital from Sale of Treasury Stock		90,000
	[To record sales of treasury stock]

Answer b.

Balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year

= $216,000 + $90,000 = $306,000 Credit balance

Answer c.

Balance in Treasury Stock on December 31 of the current year

= ( 50,000 shares - 24,000 shares - 18,000 shares) * $51 = $408,000 debit balance

Answer d. Treasury Stock be reported on the balance sheet as deduction from stockholders' equity (ie Total paid in capital + Retained earnings - Treasury stock)