Question

Office Space, Inc. sold 30,000 shares of its no-par value common stock at a cash price of $10 per share. The entry to record this transaction would be ________.
Multiple Choice.
A) Debit Cash for $30,000; credit Common Stock $30,000.
B) Debit Cash $30,000; credit Preferred Stock $30,000.
C) Debit Common Stock $300,000; credit Cash $300,000.
D) Debit Cash $300,000; credit Common Stock $300,000.
E) Debit Cash $300,000; credit Preferred Stock $300,000.

Answer 1

Answer:

Option A.

Dr Cash                    $300,000

Cr Common stock              $300,000

Explanation:

The journal entry of the shares issue with no par value is recorded with the assumption that the only amount received is the par value of the shares that were issued. Which means here we don't have Paid In capital (Share Premium), so the entry would be:

Dr Cash                    $300,000  ....... (30,000 Shares at $10 per share)

Cr Common stock              $300,000

The correct option is A.