Ellison Company\'s balance sheet shows: Common stock, $20 par $3,000,000 Paid-in

Question

Ellison Company's balance sheet shows:

            Common stock, $20 par                                       $3,000,000

            Paid-in capital in excess of par                               1,050,000

            Retained earnings                                                      750,000

Instructions

Record the following transactions by the cost method.

(a)   Bought 8,000 shares of its common stock at $29 a share.

(b)   Sold 4,000 treasury shares at $30 a share.

(c)   Sold 2,000 shares of treasury stock at $26 a share.

Explanation / Answer

4000

1) Treasury Stock A/c (8000x29) 232000 To CAsh 232000 (Record of purchase of its own Common Stock) 2) CAsh A/c (4000x30) 120000 To Treasury stock 116000 To Paid in capital from treasury stock

4000

3) cash A/c (2000x26) 52000 Paid in Capital from Treasury stock 4000 Retained Earnings 2000 To Treasury Stock 58000 (Being discount from treasury stock adjusted from excess paid in capital and retained earnings

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