Question

The entry to sell 50 shares of $10 par ordinary shares at $16 per share would include a:

a.
500 debit to cash

b. 500 debit to share capital

c.
500 credit to share capital

d. 500 credit to cash

Answer 1

Solution: Following will be the Journal entry to sell 50 shares of $10 par ordinary shares at $16 per share:

	Debit $	Credit $
Cash Account (50 Shares x $16)	800
Common Stock (50 Shares x $10)		500
Additional Paid-In Capital (50 Shares x $6)		300

Cash Account being Real Account will be debited by the total amount received. Common Stock being a Liability will be credited with the Face Value of the share and Additional Paid-In Capital being a Liability will be credited with the premium amount.

Therefore, the Correct Option is Option C: 500 credit to share capital