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, Washington Distribution permits any of its employees to buy shares directly from the company through payroll deduction. There are no brokerage fees and shares can be purchased at a 13% discount. During March, employees purchased 50,000 shares at a time when the market price of the shares on the New York Stock Exchange was $22 per share. Required: Prepare the appropriate journal entry to record the March purchases of shares under the employee share purchase plan. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

Accounts title and explanation debit credit Cash (22*50000*87%) 957000 Compensation expense (22*50000*13%) 143000 Common Stock (50000*1) 50000 Paid in capital - excess of par (50000*21) 1050000

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