Question

johannesson&johannesson sold 14 million shares of its $5 par common stock to raise capital for a voluntary non alcoholic happy hour with affiliated people. Assuming that the issue price is 11$ per share, how should johannesson&johannesson record the sale of the shares

Answer 1

johannesson&johannesson sold 14 million shares of its $5 par common stock to raise capital for a voluntary non alcoholic happy hour with affiliated people. Assuming that the issue price is 11$ per share,

.

how should johannesson &johannesson record the sale of the shares

.

When stock are issued the price above par value, Corporations may issue stock for cash. ... The sale of the stock is recorded by increasing (debiting) cash and increasing (crediting) .stock holders equity.

.

First we need to know the accounting rule

If assets are increase, should debit

If liabilities are increase, should credit.

.

When issuing common stock, The journal entry is:

.

Accounts & Explanation	Debit	Credit
Cash A/C ( 14 million * $11)	$154000000	.
.Common stock (par value) (14 million * $5)	.	$70000000
.Additional Paid in Capital - above par (14 million * 6)		$84000000
(14 million are, $5 par, issued at $11 per share )

.

**Here the cash is assets, cash are increased, so should debit

**common stock and additional paid in capital are liabilities, They are also increased, so credit them.

**

**When a company issues new common stock shares, par value is the nominal, or officially stated worth of a stock share just before investors start buying shares. However, as investors start buying shares, the actual price investors pay can and often does rise above par. The funds above par value the issuing companies receive are called additional paid-in capital