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

a) Common Stock Buy Back Dr 160000

paid in capital in excess of Par Dr 72000

To Cash 232000

( Being buy back of Common Stock 8000 @ $232000 )

b) Cash Dr 120000

To Common Stock Buy Back 80000

To paid in capital in excess of Par 40000

( being Stock Bought Back Sold @ 30 per share)

c) Cash Dr 52000

To Common Stock Buy Back 40000

To paid in capital in excess of Par 12000

( being Stock Bought Back Sold @ 26 per share)

d) Common Stock Dr 40000

To Common Stock Buy Back 40000

( Being Buy back of excess shares adjusted against share capital)

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