Treasury StockTransactions

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 itscommon stockat $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 14Treasury 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 inPaid-In Capitalfrom 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 Biscayne Bay Water Inc. have purchased the treasury stock?