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 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)

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