Question

Liberward, Inc., sold and issued 1,000 shares for $15 per share. The book value of the shares was $10 per share. The journal entry to record the share issue would include which of the following?

A). A debit to Cash for $10,000.

B). A credit to Common Shares for $10,000.

C). A credit to Common Shares for $15,000.

D). A credit to Cash for $15,000

Answer 1

1.Calculation of issue price of shares

Issue price of shares = 1000 * 15

                                 = $15,000

2.Calculation of Par value of shares

Par value of shares = 1000 * 10

                               = $10,000

3.Calculation of Additional Paid in Capital

Additional paid in capital  = $15,000 - $10,000

                                          = $5,000

Journal Entry to record the share issue

S.No	Account Titles & Explanation	Debit$	Credit$
1	Cash A/C	15,000
	To Common Shares A/C		10,000
	To Additional paid in Capital A/C		5,000
	(To record the share issue

option B. A credit to common shares for $10,000 is the correct choice

 

 

 

 

 

 

                                  

option B. A credit to common shares for $10,000 is the correct choice