Question

On March 1st, Nichols Corporation purchased 2,000 shares of previously issued common stock, paying $4 per share. On April 1st, Nichols sold 1,000 shares at $4 per share. What is the journal entry to record the sale of the 1,000 shares?

Answer 1

Answer:

The journal entry for the sale of the shares is as:

Explanation:

Cash A/c.......................Dr    $4,000

     Treasury Stock A/c......Cr   $4,000

As there is sale of stock, so the corporation is receiving the cash and any increase in the asset is debited. Therefore, the cash account is debited. And the stock is going out of the business, then decrease in stock is credited. Therefore, the treasury stock account is credited.

Working Note:

Cash = Number of Shares × Price per share

        = 1,000 × $4

        = $4,000