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A company issued 60 shares of $100 par value common stock for $7,000 cash.
The journal entry to record the issuance is:

a) Debit Common Stock $6,000, debit Investment in Common Stock $1,000; credit Cash $7,000.
b) Debit Cash $7,000; credit Common Stock $6,000; credit Paid-in Capital in Excess of Par Value, Common Stock $1,000.
c) Debit Cash $7,000; credit Common Stock $7,000.
d) Debit Cash $7,000; credit Paid-in Capital in Excess of Par Value, Common Stock $6,000, credit Common Stock $1,000.
e) Debit Investment in Common Stock $7,000; credit Cash $7,000.

Respuesta :

Answer:

b) Debit Cash $7,000; credit Common Stock $6,000; credit Paid-in Capital in Excess of Par Value, Common Stock $1,000.

Explanation:

When shares are issued and paid for, the entries required are debit to cash account and  a credit to common stock. However, when the amount received is higher than the par value of the stock issued, the excess received is recorded as a share premium or Paid-in Capital in Excess of Par Value.

As such, where the par value is $100 and 60 shares were issued, value of common stock issued

= $100 * 60

= $6,000

Paid-in Capital in Excess of Par Value = $7,000 - $6,000

= $1,000

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