Question

A corporation issued 5,000 shares of its no par common stock that was assigned a $1 stated value per share. The issue price was $10 per share. The entry to record this transaction would be: Multiple Choice Debit Cash $50,000; credit Paid-in Capital in Excess of Stated Value, Common Stock $45,000; credit Common Stock $5,000. Debit Cash $50,000; credit Common Stock $50,000. Debit Common Stock $50,000; credit Cash $50,000. Debit Treasury Stock $50,000; credit Cash $50,000. Debit Common Stock $25,000; debit Paid-in Capital in Excess of Par Value, Common Stock $5,000; credit Common Stock $45,000.

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

Cash account Dr. $50,000

        To Paid in Capital in Excess of Stated Value account $45,000

        To Common Stock account $5,000

(Stated Value 1 × $5,000)

Being common stock issued is recorded)

For recording the common stock issued we simply debited the cash account as it is increasing assets while we credited the paid in capital in Excess of Stated Value and common stock as equity is increasing.