Question

Which of the following is included in the entry to record the issuance of

15,000

shares of

$9

par value common stock at

$20

per share for​ cash?

A.Common Stock is credited for

$300,000.

B.

Paid−In

Capital in Excess of

Par—Common

is debited for

$165,000.

C.Cash is debited for

$300,000.

D.Common Stock is debited for

$135,000.

Answer 1

Which of the following is included in the entry to record the issuance of 15,000 shares of $9 par value common stock at $20 per share for​cash?

A. Common Stock is credited for $300,000.

B. Paid−In Capital in Excess of Par—Common is debited for $165,000.

C. Cash is debited for $300,000.

D. Common Stock is debited for $135,000

Answer: C. Cash is debited for $300,000.

Explanation: Journal entry for the above transaction is provided below

Particular	Debit Amount ($)	Credit Amount ($)
Cash Account DR	$300,000	-
Common Stock Account CR	-	$135,000
Securities Premium Account CR	-	$165,000
(being entry made to record issue of 15,000 common shares of $9 par value each for $20)

Note:

If shares are issue for price in excess of its face value, common stock will only be credited for the amount of face value and excess is credited to securities premium amount.

Amount credited to common stock account = 15,000 * 9 = $135,000

Amount credited to Securities Premium Account = 15,000 * (20 – 9) = $165,000