EX 13-13 Treasury stock transactions

Conyers Water Inc. bottles and distributes spring water. On July 5 of the current year, Conyers Water Inc. reacquired 12,500 shares of its common stock at $80 per share. On November 3, Conyers Water Inc. sold 7,000 of the reacquired shares at $85 per share. The remaining 5,500 shares were sold at $78 per share on December 10.

a. Journalize the transactions of July 5, November 3, and December 10.

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 Conyers Water Inc. have purchased the treasury stock?


Answer:

a. July 5 Treasury Stock (12,500 × $80)..................... 1,000,000
 Cash......................................................... 1,000,000
 Nov. 3 Cash (7,000 × $85)........................................ 595,000
 Treasury Stock (7,000 × $80).................. 560,000
 Paid-In Capital from Sale of
 Treasury Stock................................... 35,000
 Dec. 10 Cash (5,500 × $78)........................................ 429,000
 Paid-In Capital from Sale of
 Treasury Stock........................................ 11,000
 Treasury Stock (5,500 × $80).................. 440,000
b. $24,000 ($35,000 – $11,000) credit
c. Stockholders’ Equity section 



d. Conyers Water Inc. 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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