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

Answer:(a) Treasury Stock A/C Dr. $232000 (8000 share*$29)

                     To cash A/C                            $232000

Answer:(b)

Cash A/C Dr. $120000 (4000*$30)

     To Treasury Stock A/C                                $116000 (4000*$29)

      To Paid-in Capital from Treasury Stock A/C $4000

Answer:(c)

Cash A/C Dr.                                             $52000 (2000*$26)

Paid-in Capital from Treasury Stock A/C Dr. $4000

Retained Earnings A/C Dr.                          $2000

     To Treasury Stock A/C                                                 $58000 (2000*$29)

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