Answer:
a. The transactions to be journalized of July 9, September 22, and November 23 are the following:
Debit Credit
9-Jul Treasury Stock $336,200
Cash A/c $336,200
Debit Credit
Sept.22 Cash $266,800
Treasury Stock $237,800
Additional Paid in capital $29,000
Debit Credit
23-Nov Cash $$94,800
Additional Paid in capital $3,600
Treasury Stock $98,400
b. The balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year is $25,400
c. Mystic Lake Inc. have purchased the treasury stock because a company is forced to buy back shares from someone who is attempting to gain control of the business and a business has no alternative use for excess cash, and so elects to use it on a stock repurchase.
Explanation:
a. Mystic Lake reacquired 4,100 shares of its common stock at $82 per share, hence treasury stock=4,100× $82=$336,200
The Transactions of July 9 to journalize are the following:
Debit Credit
9-Jul Treasury Stock $336,200
Cash A/c $336,200
On September 22, Mystic Lake sold 2,900 of the reacquired shares at $92 per share, hence cash=2,900×$92=$266,800
Treasury stock=2,900×$82=$237,800
The Transactions of September 22 to journalize are the following:
Debit Credit
Sept.22 Cash $266,800
Treasury Stock $237,800
Additional Paid in capital $29,000
The remaining 1,200 shares were sold at $79 per share on November 23, hence, cash=1,200×$79=$94,800
Treasury stock=1,200×$82=$98,400
The Transactions of November 23 to journalize are the following:
Debit Credit
23-Nov Cash $$94,800
Additional Paid in capital $3,600
Treasury Stock $98,400
b. The Balance in Paid in capital= $29,000-$3,600=$25,400
c. Mystic Lake Inc. have purchased the treasury stock because a company is forced to buy back shares from someone who is attempting to gain control of the business and a business has no alternative use for excess cash, and so elects to use it on a stock repurchase.
