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

Journal entries

Decription Debit Credit a)Treasury stock $232,000 To Cash (8000*29) $232,000 b)Cash (4000*30) $120,000 To Treasury stock (4000*29) $116,000 To paid in excess of capital (4000*1)      4,000 c)Cash(2,000*26) $52,000 paid in capital from treasury stock    4,000 Retained earnings    2,000 To Treasury stock (2000*29) $58,000

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