Question

Olsson Corporation received a check from its underwriters for $78 million. This was for the issue of one million of its $5 par stock that the underwriters expect to sell for $78 per share. Which is the correct entry to record the issue of the stock

Answer 1

Dr Cash $78 million

Cr Common stock $5 million

Cr Paid in capital in excess of par $73 million

Step-by-step explanation:

Preparation of the journal entry to record the issue of the stock

Based on the information given we were told that the a check was received from its underwriters for the amount of $78 million by Olsson Corporation for the issue of one million of its $5 par stock that was expected of the underwriters to sell for $78 per share. Which means that the correct journal entry to record the issue of the stock will be :

Dr Cash $78 million

Cr Common stock $5 million

($1 million*$5 par stock)

Cr Paid in capital in excess of par $73 million

($78 million-$5 million)