Why isn't PIC-in excess of Par debited by 8 instead of 6 and why is Retained Earnings debited at all?
Homework Answers
The journal entry for the purchase and retirement of shares will be:
| Date | Description | Debit | Credit |
| Jan. 5, 2019 | Common stock (1m x $1) | 1 | |
| Paid-in capital-excess of par ($540 x 1/90) | 6 | ||
| Retained earnings (balance amount) | 2 | ||
| Cash | 9 | ||
| (To record purchase and retirement of shares) |
Balance in Paid-in capital-excess of par = $540 - $6 = $534
Balance in Retained earnings = $280 - $2 = $278
The paid-in capital-excess of par is debited in proportion to the number of shares retired and hence the same is debited by $540 x 1/90 = $6M while the balance amount is debited to the retained earnings.
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be $1680/$240= $7 excess of Par value just like in
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detail.
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