Concept explainers
A corporation issues 6,000 shares of $5 par value common stock for $8 cash per share. The entry to record this transaction includes
- a. A debit to Paid-In Capital in Excess of Par Value for $18.000.
- b. A credit to Common Stock for $48,000.
- c. A credit to Paid-In Capital in Excess of Par Value for $30,000.
- d. A credit to Cash for $48,000.
- e. A credit to Common Stock for $30,000.
Identify the entry to record the given transaction.
Explanation of Solution
Share issue cost:
Cost such as legal fee, promotional charge, and accounting services incurred for the purpose of share issuance would reduce the net cash proceeds from the sale of shares.
Identify the entry to record the given transaction as follows:
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) |
Cash (1) | 48,000 | |||
Common Stock (2) | 30,000 | |||
Paid-in Capital–Excess of Par value, Common stock (3) | 18,000 | |||
(To record issue of common stock at par value) |
Table (1)
Working Notes:
Compute cash received for issuance of stock.
Compute common stock value.
Compute paid-in capital in excess of par value.
Hence, the entry to record the given transaction is Option e. A credit to Common Stock for $30,000.
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Chapter 13 Solutions
Principles of Financial Accounting.
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