In order to encourage employee ownership of the company\'s $1 par common shares,

Question

In order to encourage employee ownership of the company's $1 par common shares, T corp , permits any of its employees to buy shares directly from the company through payroll deduction. There are no brokeage fees and shares can be purchased at a $10 per hsare. During June, employees purchased 150,000 shares at a time when the market price of the shares on the New York Stock exhcnage was $15 per share.

Requried: Prepare the appropriate journ'al entry to record the June purchases of shares under the employeee share purchase plan

Explanation / Answer

Debit Cash($10 x 150,000) 1,500,000

Debit Compensation expense($5 x 150,000) 750,000

Credit Common stock($1 x 150,000) 150,000

Credit Paid-in capital—in excess of par($14 x 150,000) 2,100,000

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