Question

Nexis Corp. issues 2,610 shares of $10 par value common stock at $18 per share. When the transaction is recorded, what credit entry or entries are made?

a.Common Stock $46,980.
b.Common Stock $26,100 and Paid-in Capital in Excess of Par Value $20,880.
c.Common Stock $20,880 and Retained Earnings $26,100.
d.Common Stock $26,100 and Paid-in Capital in Excess of Stated Value $20,880.

Answer 1

The credit entries when Nexis Corp. issues stock are Common Stock $26,100 and Paid-in Capital in Excess of Par Value $20,880, reflecting the par value and the excess over par value received from the stock issuance.

Step-by-step explanation:

The correct credit entry or entries when Nexis Corp. issues 2,610 shares of $10 par value common stock at $18 per share is Common Stock $26,100 and Paid-in Capital in Excess of Par Value $20,880. This is because the stock is issued at a price higher than the par value, resulting in additional paid-in capital. Here's the step-by-step explanation:

1. Determine the total amount received from the stock issuance: 2,610 shares × $18 = $46,980.
2. Calculate the par value of the issued shares: 2,610 shares × $10 = $26,100.
3. Subtract the par value from the total amount received to find the excess: $46,980 - $26,100 = $20,880.
4. Record the entries as a credit to Common Stock for the par value, and a credit to Paid-in Capital in Excess of Par Value for the excess amount.