eBook Show Me How Calculator Treasury stock transactions Cha

eBook Show Me How Calculator Treasury stock transactions Chart of Accounts Journal Final Questions Instructions Mystic Lake Inc bottles and distributes spring water. On July 9 of the current year, Mystic Lake reacquir September 22, Mystic Lake inc. sold 32,400 of the reacquired shares at $49 per share. The remaining 7,900 shares were sold at 541 per share on November 23 ed 40,300 shares of its common stock at $42 per share. On Required: A Journalize the transactions of Julty 9, September 22, and November 23. Refer to the Chart of Accountao for exact wording of account ttes B. What is the balance in Paid-in Canital from Sale of Treasury Stock on December 31 of the current year? C. For what reasons might Mystic Lake have purchased the treasury stock?

Solution

A. The following are the required journal entries.

..........To Cash a/c

b. Paid in capital from sale of treasury stock account balance as on december 31.

($226,800 -$7,900) =>$218,900 credit balance.

c. To support the market price of the stock.

Date	General journal	Post ref	Debit	Credit
July 9	Treasury stock a/c		$1,692,600
	..........To Cash a/c			$1,692,600
	(being treasury stock purchased @$42 per share , 40,300 shares)
sept 22	Cash a/c (32,400 * $49)		$1,587,600
	.....................to treasury stock a/c (32,400 * 42)			$1,360,800
	.............To Paid in capital from sale of treasury stock a/c..($7*32,400)			$226,800
	(being 32,400 shares purchased for $42 now sold for $49, $7 per share is credited to paid in capital from treasury account)
Nov 23	cash a/c ($41 * 7,900)		$323,900
	paid in capital from sale of treasury stock a/c...($1 * 7,900)		$7,900
	..............To treasury stock a/c....($42 * 7900)			$331,800
	(being 7,900 shares sold off as treasury stock a/c)