Answer:
A.
July 1
Dr Cash $240,000
Cr Common Stock $160,000
Cr Paid in Capital in excess of stated value common stock $80,000
Sept. 1
Dr Treasury stock $36,000
Cr Cash 36,000
Dec. 1
Dr Cash 20,000
Cr Treasury Stock $18,000
Cr Paid in Capital in excess of stated value common stock $2,000
B. July 1
Dr Common stock $80,000
Cr Paid in Capital in excess of stated value common stock $80,000
Sept. 1
Dr Treasury Stock $36,000
Cr Common stock $30,000
Cr Retained earning $6,000
Dec. 1
Dr Common stock $15,000
Dr Gain on sale of stock $5,000
Cr Treasury Stock $18,000
Cr Paid in capital from Treasury stock $2,000
Explanation:
A. Preparation of the entry that should have been made for the transactions.
July 1
Dr Cash $240,000
Cr Common Stock $160,000
(Issued 16,000 shares of no-par common stock, stated value $10 per share)
Cr Paid in Capital in excess of stated value common stock $80,000
($240,000-$160,000)
Sept. 1
Dr Treasury stock $36,000
Cr Cash 36,000
(Purchased 2,000 shares issued on July 1 for the treasury at $18 per share)
Dec. 1
Dr Cash 20,000
(Sold 1,000 shares of the treasury stock at $20 per share)
Cr Treasury Stock $18,000
(Sold 1,000 shares of the treasury stock at $18 per share)
Cr Paid in Capital in excess of stated value common stock $2,000
($20,000-$18,000)
B. Preparation of the correcting entries that should be made to correct the accounts of Chetola Corporation
July 1
Dr Common stock $80,000
Cr Paid in Capital in excess of stated value common stock $80,000
($240,000-$160,000)
Sept. 1
Dr Treasury Stock $36,000
(Purchased 2,000 shares issued on July 1 for the treasury at $18 per share)
Cr Common stock $30,000
Cr Retained earning $6,000
Dec. 1
Dr Common stock $15,000
Dr Gain on sale of stock $5,000
Cr Treasury Stock $18,000
(Sold 1,000 shares of the treasury stock at $18 per share)
Cr Paid in capital from Treasury stock $2,000
($15,000+$5,000-$18,000)