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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 Prepare necessary journal entries to record the following transactions by the cost method.Show your work for partial credits.  Bought 12,000 shares of its common stock at $29 a share.  Sold 6,000 treasury shares at $30 a share.  Sold 3,000 shares of treasury stock at $26 a share.

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 Prepare necessary journal entries to record the following transactions by the cost method.Show your work for partial credits.  Bought 12,000 shares of its common stock at $29 a share.  Sold 6,000 treasury shares at $30 a share.  Sold 3,000 shares of treasury stock at $26 a share.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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

Prepare necessary journal entries to record the following transactions by the cost method.Show your work for partial credits.

  1.  Bought 12,000 shares of its common stock at $29 a share.
  2.  Sold 6,000 treasury shares at $30 a share.
  3.  Sold 3,000 shares of treasury stock at $26 a share.
Expert Solution
Step 1

Treasury stock: Shares which are bought back by the company from the open market but not retired from the company stock is called  Treasury stock. The purchase/reacquisition of issued shares from the open market, decreases the number of outstanding shares.

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