Answer:
Debit cash for $312,000
Credit common stock for $26,000
Credit Paid in capital in excess of par value, common stock for $286,000.
Explanation:
Selling the share at $12 per share which is higher than the par value of $1 indicates that the shares are sold at a premium of $11 (i.e. $12 - $1 = $11). Therefore, there is a paid in capital in excess of par value of $11 per share.
Before posting the entries, we do the following calculation first.
Cash received = 26,000 * $12 = $312,000
Common stock = 26,000 * $12 = $26,000
Paid in capital in excess of par value = 26,000 * 11 = $286,000
The entry to record this transaction would therefore appear as follows:
<u>Pariculars Dr ($) Cr ($) </u>
Cash 312,000
Common stock 26,000
Paid in capital in ex. of par v. - Common stock 286,000
<u><em>To record issue of common stock at a premium. </em></u>
