6. A new accountant with extensive experiencein partnership accounting was hired

Question

6. A new accountant with extensive experiencein partnership accounting was hired by Platch Corporation. Because of the pressure of the new job, the accountant forgot to review textbooks on the topic of corporation accounting. During the first month, the accountant made the following entries for the corporation’s capital stock transactions: May 2 Cash 130,000 Capital Stock 130,000 Issued 10,000 shares of $10 par value common stock at $13 per share. May 10 Cash 600,000 Capital Stock 600,000 Issued 10,000 shares of $50 par value preferred stock at $60 per share. May 15 Capital Stock 15,000 Cash 15,000 Purchased 1,000 shares of common stock for the treasury at $15 per share. Cash 8,000 Capital Stock 5,000 Gain on Sale of Stock 3,000 Sold 500 shares of treasury stock at $16 per share.On the basis of the explanation for each entry, prepare the entry that should have been made for the capital stock transactions.

Explanation / Answer

Journal Entries:

Date Account Name Debit Credit May 2 Cash 130000        Common Stock 100000        Additional Paid in share capital 30000 May 10 Cash 600000        Common Stock 500000        Additional Paid in share capital 100000 May 15 Common Stock 15000        Treasury Stock 15000 Cash 8000        Treasury Stock 5000        Gain on sale of treasury stock 3000

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