Connect Access Card For Financial Accounting Fundamentals
Connect Access Card For Financial Accounting Fundamentals
7th Edition
ISBN: 9781260482829
Author: John J Wild
Publisher: McGraw-Hill Education
Question
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Chapter 11, Problem 1MCQ
To determine

Identify the entry to record the given transaction.

Expert Solution & Answer
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Explanation of Solution

Share issue cost:

Cost such as legal fee, promotional charge, and accounting services incurred for the purpose of share issuance would reduce the net cash proceeds from the sale of shares.

Identify the entry to record the given transaction as follows:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
Cash (1)48,000
     Common Stock (2)30,000
     Paid-in Capital–Excess of Par value, Common stock (3)18,000
(To record issue of common stock at par value)

Table (1)

Working Notes:

Compute cash received for issuance of stock.

Cash received for stock = Number of shares issued×Sale price per share= 6,000shares×$8= $48,000 (1)

Compute common stock value.

Common stock value= Number of shares × Par value per share= 6,000 shares × $5= $ 30,000 (2)

Compute paid-in capital in excess of par value.

Paid-in capital in excess of par value} = {Cash received –Common stock value}= $48,000 – $30,000= $18,000 (3)

Hence, the entry to record the given transaction is Option e. A credit to Common Stock for $30,000.

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Chapter 11 Solutions

Connect Access Card For Financial Accounting Fundamentals

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