EX 13-11 Treasury stock transactions

Deer Creek Inc. bottles and distributes spring water. On April 27 of the current year, Deer Creek reacquired 15,000 shares of its common stock at $60 per share. On July 13, Deer Creek sold 9,000 of the reacquired shares at $72 per share. The remaining 6,000 shares were sold at $59 per share on October 8.

a. Journalize the transactions of April 27, July 13, and October 8.

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 Deer Creek have purchased the treasury stock?


Answer:


a. Apr. 27 Treasury Stock ............................................. 900,000
 Cash......................................................... 900,000
 July 13 Cash .............................................................. 648,000
 Treasury Stock (9,000 × $60).................. 540,000
 Paid-In Capital from Sale of
 Treasury Stock................................... 108,000
 Oct. 8 Cash .............................................................. 354,000
 Paid-In Capital from Sale of
 Treasury Stock........................................ 6,000
 Treasury Stock (6,000 × $60).................. 360,000
b. $102,000 ($108,000 – $6,000) credit 


c. Deer Creek may have purchased the stock to support the market price of the stock, to provide shares for resale to employees, or for reissuance to employees as a bonus according to stock purchase agreements.

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