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Goldberg Corporation had the following equity accounts on January 1, 2014: Shares Capital Shares Capital-Ordinary (100,000 shares issues at 53 par value) $300,000, Shares Premium-Ordinary $100,000, and retained earnings $150,000
Goldberg Corporation had the following equity accounts on January 1, 2014: Shares Capital Shares Capital-Ordinary (100,000 shares issues at 53 par value) $300,000, Shares Premium-Ordinary $100,000, and retained earnings $150,000. The company had the following treasury shares transactions, 1. June 1Purchased 10,000 shares for cash at $12 per share. 2. July 1 Sold 3,000 treasury shares for cash at $14 per share, The correct Journal on July, 1 42,000 Treasury Shares Shares Premium-treasury shares 6,000 36,000 Casti 42,000 Treasury Shares 42,000 120,000 Treasury Shares Cashi 120,000 42,000 0 Cash Treasury Shares Shares Premium-treasury shares 36,000 6,000
Expert Solution
Correct journal entry will be-
Cash.................................42,000
Treasury shares.............................36,000
Shares Premium treasury shares........................6,000
Explanation-
Since we are selling the shares, cash is coming in. Cash is an asset and when it comes in, it is debited. Therefore, cash will be debited by 3000 x $14 = 42,000
The shares were purchased at $12 per share. Therefore, treasury shares will be credited by 3000 x $12 = 36,000
Remaining difference, 42000 - 36000 = 6000 will be credited by name of shares premium.
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