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Gomez Inc.'s charter authorizes 1,000 shares of stock at a par value of $1 per share. Gomez sells 200 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include which of the following entries

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Answer:

Dr Cash account 200

Cr Common Stock account 200

Explanation:

Since cash is an asset account and it is increasing, it should be debited.

Since common stock is an equity account and it is increasing, it should be credited.

When new stocks are sold, they must be recorded at par value. Any extra money received from a stock sale (this is not the case) should go in the Paid in Excess of Par Value Account