Question

A company issues 1 million shares of common stock with a par value of $0.17 for $16.50 a share. The entry to record this transaction includes a debit to Cash for:________.a) $170,000 and a credit to Common Stock for $170,000.b) $16,500,000 and a credit to Common Stock for $16,500,000.c) $16,500,000, a credit to Common Stock for $170,000, and a credit to Additional Paid-in Capital for $16,330,000.d) $170,000, a debit to Capital Receivable for $16,330,000, a credit to Common Stock for $170,000, and a credit to Additional Paid-in Capital for $16,330,000.

Answer 1

c) $16,500,000, a credit to Common Stock for $170,000, and a credit to Additional Paid-in Capital for $16,330,000.

Step-by-step explanation:

The journal entry is as follows:

Cash Dr (1 million shares × $16.50) $16,500,000

To Common stock (1 million shares × $0.17) $170,000

To Additional paid in capital in excess of par value $16,330,000

(Being the issuance of the shares is recorded)

Here cash is debited as it increased the assets and the rest of the two accounts are credited as it also increased the equity

Therefore the correct option is c