Treasury Stock Transactions

Lava Lake Inc. bottles and distributes spring water. On February 11 of the current year, Lava Lake reacquired 180,000 shares of its common stock at $17 per share. On April 30, Lava Lake Inc. sold 90,000 of the reacquired shares at $20 per share. On August 22, Lava Lake Inc. sold 30,000 shares at $15 per share.

Question Content Area

a. Journalize the transactions of February 11, April 30, and August 22. If an amount box does not require an entry, leave it blank.

Feb. 11
Apr. 30
Aug. 22

Question Content Area

b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?

Debit or Credit

c. For what reasons might Lava Lake have purchased the treasury stock?

1. For reissuance to employees as a bonus according to stock purchase agreements.

2. To provide shares for resale to employees.

3. To support the market price of the stock.

4. All of these reasons.

5. None of these reasons.