Question

A corporation issued 2,500 shares of its no par common stock at a cash price of $11 per share. The entry to record this transaction would be: A. Debit Treasury Stock $27,500; credit Cash $27,500. B. Debit Cash $27,500; credit Common Stock $27,500. C. Debit Common Stock $27,500; credit Cash $27,500. D. Debit Cash $27,500; credit Paid-in Capital in Excess of Par Value, Common Stock $2,500; credit Common Stock $25,000. E. Debit Treasury Stock $2,500; debit Paid-in Capital in Excess of Par Value, Treasury Stock $25,000; credit Common Stock $27,500.

Answer 1

Answer:

B. Debit cash $27,500 ; Credit common stock $27,500

Explanation:

The journal entry to record the transaction is;

Cash account Dr $27,500

(2,500 shares × $11)

To Common stock account Cr $27,500

Cash is an asset hence debited because it decreases as it was used to pay for bills while common stock is credited because it increases shareholder's equity.