Question

Dawson Company issued 600 shares of no-par common stock for $5,400. Which of the following journal entries would be made if the stock has stated value of $2 per share?a. Cash 5,400Common Stock 5,400b. Cash 5,400Common Stock 1,200Paid-in Capital in Excess of Par 4,200c. Cash 5,400Common Stock 1,200Paid-in Capital in Excess of Stated Value 4,200d. Common Stock 5,400Cash 5,400

Answer 1

Answer:

b. Cash               5,400 Debit

    Common Stock                                    1,200 Credit

    Paid-in Capital in Excess of Par          4,200 Credit

Explanation:

the cash proceeds will be for 5,400

common stock will increase for the face value:

600 shares x 2 = 1,200

the paid-in capital in excess of par value will be the difference:

5,400 - 1,200 = 4,200

Cash, which is an asset increase for mdebit side while the common stock and additional paid-in are equity accounts. They increase from the credit side.