Question

Which One of the Entries Below would be included in the Journal Entry to Record the Following Transaction.

Our Corporation Issues 200,000 Shares of $1 par Value Common stock for $4 each.

Answer 1

To record the transaction of issuing 200,000 shares of $1 par value common stock for $4 each, the correct journal entry would include a debit to Cash for $800,000, a credit to Common Stock for $200,000, and a credit to Paid-in Capital in Excess of Par for $600,000.

Step-by-step explanation:

The correct entry in the journal to record the transaction of issuing 200,000 shares of $1 par value common stock for $4 each would be:

1. Debit Cash - $800,000 (200,000 shares x $4)
2. Credit Common Stock - $200,000 (200,000 shares x $1)
3. Credit Paid-in Capital in Excess of Par - $600,000 ($800,000 - $200,000)

This entry records the receipt of cash (debit) and the issuance of common stock at par value (credit). The remaining amount is recorded as paid-in capital in excess of par, representing the premium received above the par value of the stock.