Question

Olsson Corporation received a check from its underwriters for $72 million. This was for the issue of one million of its $5 par stock that the underwriters expect to sell for $72 per share. Which is the correct entry to record the issue of the stock? Multiple Choice Cash 72,000,000 Common stock 5,000,000 Paid-in capital—excess of par 67,000,000 Cash 72,000,000 Deferred stock issue revenue 20,000,000 Common stock 5,000,000 Paid-in capital—excess of par 47,000,000 Cash 72,000,000 Stock issue expense 20,000,000 Stock contract receivable 52,000,000 Cash 72,000,000 Common stock 72,000,000

Answer 1

Answer:

Cash 72,000,000

Common stock 5,000,000

Paid-in capital—excess of par 67,000,000

Explanation:

For the company doesn't exist difference with whom have the stock, so the money is Cash Account and Stockholders' equity in the Equity Section.  

The underwriters works most of the time during an IPO (Initial Public Offering), it's when the company sell corporate shares in an open market  

exchange for the first time.  

Exist different kind of agreements with the underwriters, the most common it's when the underwriter  

assume the risk of buying the entire inventory of stock issued.  

This kind of service where a bank investment intermediate between the company and the potential buyers of the stock are used  

during a public offering in a primary market, primary market means that the shares are not available  

for the entrie market if not just for the intermediate investment bank.