Question

If Pratt Company issues 5,000 shares of $5 par value common stock for $210,000, the accounta. Common Stock will be credited for $185,000.b. Paid-in Capital in Excess of Par Value will be credited for $210,000.c. Paid-in Capital in Excess of Par Value will be credited for $235,000.d. Cash will be debited for $210,000.

Answer 1

Answer:

d. Cash will be debited for $210,000.

Explanation:

The journal entry for the issue of shares is shown below:

Cash A/c Dr $210,000

   To common stock  (5,000 shares × $5) = $25,000

   To Paid-in Capital in Excess of Par Value  $185,000

(Being issue of shares recorded)

So, the cash account is debited whereas the common stock and paid-in capital should be credited

And, the remaining balance should be transferred to the Paid-in Capital in Excess of Par Value