Question

Popular Inc. began business on January 1, 2017. The corporate charter authorized issuance of 1,000 shares of no-par value common stock, of which 200 shares were issued on January 1, and 4,000 shares of $8 par value, 6% cumulative preferred stock, of which none were issued on January 1. Portland Sound sold 400 shares of common stock at $8 per share on May 1. The entry to record the issuance of the shares on May 1 will

a.
increase Cash, $1,000; increase Additional Paid-In Capital—Common, $320 and increase Common Stock, $680.

b.
increase Cash, $3,200; increase Additional Paid-In Capital—Common, $2,800 and increase Common Stock, $400.

c.
increase Cash, $4,800 and increase Common Stock, $4,800.

d.
increase Cash, $3,200 and increase Common Stock, $3,200.

Answer 1

The correct entry to record the issuance of the shares on May 1 will be option a.increase Cash, $1,000; increase Additional Paid-In Capital—Common, $320 and increase Common Stock, $680. Hence, the correct answer is option (a).

Step-by-step explanation:

The correct entry to record the issuance of the shares on May 1 will be option a. increase Cash, $1,000; increase Additional Paid-In Capital—Common, $320 and increase Common Stock, $680.

When Portland Sound sells 400 shares of common stock at $8 per share, the total amount received would be $3200 (400 shares x $8 per share). Out of this, $1000 will be added to the Cash account, $320 will be added to the Additional Paid-In Capital—Common account, and $680 will be added to the Common Stock account.