Question

A corporation sold 19,000 shares of its 10 par value common stock at a cash price of13 per share. The entry to record this transaction would include:

1) A credit to paid-in capital in excess of par value, common stock for $437,000.
2) A credit to common stock for $190,000.
3) A debit to cash for $190,000.
4) A credit to common stock for $247,000.
5) A debit to paid-in capital in excess of par value, common stock for $247,000.

Answer 1

The correct journal entry for the sale of 19,000 shares at $13 each includes debiting cash for $247,000 and crediting common stock for par value of $190,000, with the excess credited to paid-in capital in excess of par value for $57,000.

Step-by-step explanation:

When a corporation sells shares, it creates a journal entry to record the transaction. In the case where a corporation sold 19,000 shares of its $10 par value common stock at a cash price of $13 per share, the entry would include:

• A debit to cash for $247,000 (19,000 shares × $13 per share).
• A credit to common stock for $190,000 (19,000 shares × $10 par value).
• A credit to paid-in capital in excess of par value, common stock for $57,000 ([(19,000 shares × $13 sale price) – (19,000 shares × $10 par value)].

Therefore, the correct choices from the provided options would be 2) A credit to common stock for $190,000 and not 4) A credit to common stock for $247,000, as the cash received is $247,000, but the par value credited to common stock should be $190,000.