Question

Darlington Inc., permits any of its employees to buy shares directly from the company. There are no brokerage fees and shares can be purchased at a 10% discount. During May, employees purchased 14,000 shares at a time when the market price of the shares was $10 per share. Prepare the appropriate journal entry for the May purchase. (

Answer 1

Answer: Please refer to Explanation

Explanation:

The following is the appropriate journal entry.

DR Bank Account (14,000 * 10 - 10%) $126,000

DR Employee Compensation Expense (10% * $140000) $14,000

CR Share Capital Account $140,000

(To record issue of shares to employees)

If you need any clarification do comment.

Answer 2

Answer:

Dr Cash 126,000

Dr Compensation expense 14,000

Cr Common stock 14,000

Cr Paid-in capital—in excess of par 126,000

Explanation:

Darlington Inc Journal entry

Dr Cash ($10 x 14,000 x 90%) 126,000

Dr Compensation expense ($10 x 14,000 x 10%) 14,000

Cr Common stock ($1 x 14,000) 14,000

Cr Paid-in capital—in excess of par ($9 x 14,000) 126,000