Question

When a company issued 25,000 shares of $1 par value common stock for $10 per share, the journal entry for this issuance would include__________.
A. A credit to Additional Paid-in Capital for $225,000.
B. A debit to Cash for $25,000.
C. A credit to Common Stock for $250,000.
D. A debit to Additional Paid-in Capital for $25,000.

Answer 1

Option D,  When a company issued 25,000 shares of $1 par value common stock for $10 per share, the journal entry for this issuance would include a debit to Additional Paid-in Capital for $225,000.

Explanation:

A debit for money is included as a record of the issue of ordinary stocks at a rate above par. The question price increases cash (debit). Credit for both common stocks (increased) and payout equity exceeding the common stock (increased) would be included in the journal entry.

The Journal Entry would be,

Debit Cash is $250,000 ($25,000 shares x $10)  

Credit Common Stock is $25,000 ($25,000 shares x $1)

Additional paid-In capital in excess par—common stock is $225,000 ($250,000 - $25,000)