Question

When a company issues 33,000 shares of $4 par value common stock for $40 per share, the journal entry for this issuance would include__________.

Answer 1

Debit Cash or Bank Account $1,320,000

Credit Share Capital Account $132,000

Credit Share Premium Account $1,188,000

Step-by-step explanation:

The journal entry to record issue of common stock for more than its par value will be as follows:

Debit Cash or Bank Account

(33,000 shares × $40 per share) $1,320,000

Credit Share Capital Account

(33,000 shares × $4 par value per share) $132,000

Credit Share Premium Account

(33,000 shares × ($40 - $4)per share) $1,188,000

Share capital account is always credited for issuance of shares at par value and the difference between par value and issuance value is taken to the share premium account. Here, the company issued its shares at $36 per share premium.