Asked by Jennifer LopezRamos on May 08, 2024
Verified
The entry to record MidIowa.net selling 1,000 shares of $8.00 par value common stock at $10.00 would be to:
A) debit Cash $10,000; credit Common Stock $8,000; credit Paid-in Capital in Excess of Par Value-Common $2,000.
B) debit Cash $10,000; credit Common Stock $10,000.
C) debit Cash $8,000; debit Paid-in Capital in Excess of Par Value-Common $2,000; credit Common Stock $10,000.
D) None of these answers is correct.
Paid-In Capital
The total amount of money that shareholders have invested in a company by purchasing its stock, excluding retained earnings.
Par Value
The nominal or face value of a bond, share of stock, or other financial instrument, set at the time of its issue.
- Utilize understanding of stock transactions for precise recording of journal entries, encompassing dealings with common stock, preferred stock, and surplus of par value.
Verified Answer
DB
duygu bekmenMay 14, 2024
Final Answer :
A
Explanation :
When a company sells shares above their par value, the entry includes debiting Cash for the total amount received, crediting Common Stock for the par value multiplied by the number of shares, and crediting Paid-in Capital in Excess of Par Value for the amount received above the par value. In this case, $10,000 is received (1,000 shares at $10 each), the Common Stock is credited for $8,000 (1,000 shares at the $8 par value), and the excess $2,000 is credited to Paid-in Capital in Excess of Par Value.
Learning Objectives
- Utilize understanding of stock transactions for precise recording of journal entries, encompassing dealings with common stock, preferred stock, and surplus of par value.
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