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

Account Title Debit Credit A) Bought back of Common Stock: Common Stock ( 8000*20)        160,000 Paid In Capital in Excess (8000*9)          72,000        To Cash ( 8000*29) 232,000 B) Sold Treasury stock : Cash (4000*30)        120,000    To Treasury Stock (4000*20)     80,000    To Paid in Capital in Excess (4000*10)     40,000 B) Sold Treasury stock : Cash (2000*26)          52,000    To Treasury Stock (2000*20)     40,000    To Paid in Capital in Excess (2000*6)     12,000

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