Question

Comfort Mattresses, Inc. sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share. The entry to record this transaction would be:
A. Debit Cash $312,000; credit Common Stock $26,000; credit Paid-in Capital in Excess of Par Value. Common Stock $206,000.
B. Debit Cash for $312,000; credit Common Stock $312,000.
C. Debit Common Stock $26,000; debit Paid-in Capital In Excess of Par Value, Common Stock $286,000; credit Cash $312,000.
D. Debit Cash $312,000; credit Stock Liability $286,000; credit Common Stock $26,000.
E. Debit Common Stock $26,000; credit Cash $26,000.

Answer 1

Answer: A. Debit Cash $312,000; credit Common Stock $26,000; credit Paid-in Capital in Excess of Par Value. Common Stock $286,000.

Explanation:

Par Value of stock = 26,000 * 1 = $26,000

Cash received = 26,000 * 12 = $312,000

Paid in Capital in excess of Par, Common stock = 312,000 - 26,000 = $286,000

Cash would be debited by the amount received.

Common Stock would be credited by the Par value of $26,000

Paid in Capital in excess of Par will be credited as well for $286,000.