Question

Percy Corporation was formed on January 1. The corporate charter authorized 100,000 shares of $10 par value common stock. During the first month of operation, the corporation issued 280 shares to its attorneys in payment of a $4,800 charge for drawing up the articles of incorporation. The entry to record this transaction would include:_________A) A debit to Organization Expenses for $4,800.B) A debit to Organization Expenses for $2,800.C) A credit to Common Stock for $4,800.D) A credit to Paid-in Capital in Excess of Par Value, Common Stock for $4,800.E) A debit to Paid-in Capital in Excess of Par Value, Common Stock for $2,000.

Answer 1

A. The answer is a debit to organization expenses for $4,800

Step-by-step explanation:

A debit to organization expense of $2,800 is not enough to fully pay the attorneys

The credit to common stock would be $2,800 (280 shares x $10 par value)

A credit to Contributed Capital in Excess of Par Value, Common Stock for $4,800 is too much

A debit to Contributed Capital in Excess of Par Value, Common Stock for $2,000 is incorrect. The account would be credited , not debited.