Question

When Wisconsin Corporation was formed on January 1, the corporate charter provided for 100,000 share of $10 par value common stock. The following transaction was among those engaged in by the corporation during its first month of operation: The corporation issued 8,500 shares of stock at a price of $16 per share.
The entry to record the above transaction would include a
A. debit to Cash for $85,000
B. credit to Common Stock for $136,000
C. credit to Paid in Capital in Excess of Par for $51,000
D. debit to Common Stock for $85,000

Answer 1

Answer:

Option (C) is correct.

Explanation:

The Journal entry is as follows:

Cash A/c (8,500 × $16) Dr. $136,000

      To  Common stock  $85,000          

       To Paid in Capital in Excess of Par $51,000

Workings:

Common stock:

= Shares of stock × Par value of stock

= 8,500 shares × $10

= $85,000

Paid in Capital in Excess of Par:

= 8,500 shares × ($16 - $10)

= 8,500 shares × $6

= $51,000