Question

Alt Corp. issues 5,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, increases are made to:
a. Common Stock $50,000 and Paid-in Capital in Excess of Stated Value $20,000.
b. Common Stock $70,000.
c. Common Stock $50,000 and Paid-in Capital in Excess of Par Value $20,000.
d. Common Stock $50,000 and Retained Earnings $20,000.

Answer 1

Answer:

c. Common Stock $50,000 and Paid-in Capital in Excess of Par Value $20,000.

Explanation:

The journal entry for issuance of the common stock for cash is shown below:

Cash A/c Dr $70,000

        To Common stock $50,000 (5,000 shares × $10)

        To Additional paid in capital A/c - Common stock A/c $20,000

(Being the common stock is issued for cash)

While recording this entry it increased the assets so the cash account is debited while at the same time it also increased the common stock for $50,000 and the additional paid in capital in excess of par value i.e $20,000 so both these account are credited