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    Fundamental Accounting Principles

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    E3-7 Art Wyatt Corporation recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the first month, the accountant made the following entries for the corporation's capital stock.

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    Instructions
    On the basis of the explanation for each entry, prepare the entry that should have been made for the capital stock transactions.

    © BrainMass Inc. brainmass.com December 24, 2021, 4:54 pm ad1c9bdddf
    https://brainmass.com/business/business-math/fundamental-accounting-principles-capital-stocks-14398

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    Hi there,

    Here are your entries:

    May 2:
    DR: Cash 144,000
    CR: Gain on sale of Capital stock 84,000
    CR: Capital stock 60,000

    May 10:
    DR: Cash 60,000
    CR: Gain on sale of Capital stock 10,000
    CR: Capital stock 50,000

    May 15:
    This entry looks good. I don't see anything wrong with it

    May 31:
    Again, this entry looks good. The only thing that could possibly be wrong is related to the fact that it was treasury stock that was sold. If that is the case, then the original purchase value of $14/share would be used. The $5/share value that was used relates only to the common shares. There is a difference between common, preferred and treasury shares.
    The entry would then be:
    DR: Cash 7,500
    CR: Capital Stock 6,000
    CR: Gain on sale 1,500

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 4:54 pm ad1c9bdddf>
    https://brainmass.com/business/business-math/fundamental-accounting-principles-capital-stocks-14398

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