Question

Centex, Inc. Issued 50,000 shares of its $1 par value of the following? common stock for $20 per share. The journal entry to record the stock issue would include whici

a) A credit to additional paid-in capital for $50.000
b) A credit to cash for $1,000,000.
c) A credit to additional paid-in capital for $1,000,000.
d) A credit to common stock for $50,000

Answer 1

The correct journal entry for Centex, Inc.'s issuance of common stock includes a credit to Common Stock for $50,000, a debit to Cash for $1,000,000, and a credit to Additional Paid-in Capital for $950,000. Correct option is d)

Step-by-step explanation:

The student is asking about the correct journal entry for the issue of common stock by Centex, Inc. The company issued 50,000 shares at a price of $20 per share where each share has a par value of $1.

The journal entry should include:

• A debit to Cash for the total amount received, which is $20 per share times 50,000 shares, amounting to $1,000,000.
• A credit to Common Stock for the par value of the shares, which is $1 per share times 50,000 shares, totaling $50,000.
• A credit to Additional Paid-in Capital for the excess of the cash received over the par value of the stock, which can be calculated as ($20 - $1) per share times 50,000 shares, equaling $950,000.

Thus, the correct journal entry would involve option d) a credit to common stock for $50,000 and a debit to cash for $1,000,000. The Additional Paid-in Capital would actually be credited for $950,000, which is not listed as one of the provided options in the question.