Question

A company issued 60 shares of $100 par value common stock for $7,000 cash. The journal entry to record the issuance is:

Answer 1

Answer:

Debit Cash $7,000; credit Common Stock $6,000; credit Paid-in Capital in Excess of Par Value, Common Stock $1,000.

Explanation:

• Since we are receiving cash $7,000 by issuing stocks, therefore the cash would be debited by $7,000

• We credited the common stock by $6,000 because in common stock account we record only par value of stock. The calculation for common stock is:

       ⇒ Shares issued * Par Value

       ⇒ 60 * 100

       ⇒ $6,000

• The excess amount received by issuing stock are credited and recorded as Paid-in-Capital in excess of Par Value, which is $1,000 in our case.

                                         Journal Entry

Cash                                                                      7,000

       Common Stock                                                         6,000

        Paid-in Capital in Excess of Par Value                    1,000