Question

Suppose 100 common shares are issued for $12.50 per share. The entry to record this issuance includes a:

a) credit to Common shares for $1,250
b) debit to Preferred Shares for $1,000
c) credit to Retained Earnings for $1,250
d) credit to Contributed Surplus for $250

Answer 1

Option (a), The entry to record the issuance of 100 common shares for $12.50 per share includes a credit to Common shares for $1,250.

Step-by-step explanation:

When 100 common shares are issued for $12.50 per share, the accounting entry to record this issuance would include a credit to Common shares for $1,250. This is because the credit entry represents the amount of capital the company has received from the shareholders in exchange for the shares.

No entry would be made to Preferred Shares or Retained Earnings in this case, and there is no mention of additional paid-in capital or contributed surplus that would justify a credit to Contributed Surplus.