Question

Mystic Lake Inc. bottles and distributes spring water. On July 9 of the current year, Mystic Lake reacquired 60,000 shares of its common stock at $42 per share. On September 22, Mystic Lake sold 45,000 of the reacquired shares at $51 per share. The remaining 15,000 shares were sold at $40 per share on November 23. a. Journalize the transactions of July 9, September 22, and November 23. If an amount box does not require an entry, leave it blank.

Answer 1

Answer and Explanation:

The journal entries are shown below:

On July 9

Treasury Stock A/c Dr. $2,520,000 ($42 × 60,000 shares)

To Cash A/c $2,520,000

(Being the reacquired shares are recorded)

On September 22

Cash A/c Dr. $2,295,000 ($51 × 45,000 shares)

To treasury stock $1,890,000 ($42 × 45,000 shares)

To Additional paid in capital A/c $405,000 ($2,295,000 - $1,890,000)

(Being the reacquired shares are recorded)

On November 23

Cash A/c Dr. $600,000 ($40 × 15,000)

Additional paid in capital A/c Dr. $30,000 (15,000 shares × $2)

To Treasury stock A/c Cr. $630,000

(Being the shares sold are recorded)