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Treasury Stock Transactions Biscayne Bay Water Inc. bottles and distributes spring water. On May 14 of...

Treasury Stock Transactions

Biscayne Bay Water Inc. bottles and distributes spring water. On May 14 of the current year, Biscayne Bay Water Inc. reacquired 2,300 shares of its common stock at $69 per share. On September 6, Biscayne Bay Water Inc. sold 1,700 of the reacquired shares at $74 per share. The remaining 600 shares were sold at $64 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.

May 14 Treasury Stock
Cash
Sept. 6
Nov. 30

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The repurchase of shares, known as treasury stock, is typically recorded using the cost method. When the treasury stock is resold, what is the company receiving? What is it giving up? Keep in mind the price paid to buy the treasury stock and the price the shares are resold for at a later date.

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

c. Where will the balance in Paid-In Capital from Sale of Treasury Stock be reported on the balance sheet?
Stockholders' Equity section

d. For what reasons might Biscayne Bay Water Inc. have purchased the treasury stock?
All of these reasons.

Solutions

Expert Solution

a. Journal Entry
Date Detail Debit Credit
14-May Treasury Stock $158,700
Cash $158,700
Being 2300 Share reacquired @ 69
06-Sep Cash $125,800
Paid in Capital from sale of Treasury Stock $22,800
Treasury Stock $103,000
Being 1700 Share reacquired sale @ 74
30-Nov Cash $38,400
Paid in Capital from sale of Treasury Stock $3,000
Treasury Stock $41,400
Being 600 Share reacquired sale @ 64 $19,400
b. Computation in Balance in Paid in capital from sale of Treasury Stock
Amount
Gain (74-69) i.e. 5/sharedue to sold 1700 share @ 74 22800
Loss (64-69) i.e. 5/share due to sold 600 share @ 64 -3000
Balance 19800

c. Company may take an option to re purchae the stock choose from outstanding stock from its shareholders when idle cash was available with them and try increase the stock price.

ekkarill92 answered 1 year ago
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