Question

Dynatech issues 1,000 shares of $10 par value common stock at $12 per share. When the transaction is recorded, which accounts are credited? Common Stock $12,000 Common Stock $10,000 and Paid-in Capital in Excess of Par Value $2,000 Common Stock $10,000 and Gain on Stock Sale $2,000 Common Stock $10,000 and Retained Earnings $2,000

Answer 1

Common Stock $10,000 and Paid-in Capital in Excess of Par Value $2,000

Step-by-step explanation:

The journal entry to record the issuance of common stock is presented below:

Cash A/c Dr $12,000 (1,000 shares × $12)

To Common Stock $10,000 ($1,000-× $10)

To Additional Paid-in Capital in excess of par - Common Stock $2,000

(Being the issuance of stock is reported and the remaining balance i.e $2,000 is credited to the additional paid-in capital account)

While issuing the stock, we debited the cash account as there is a cash inflow and credited the common stock and additional paid-in capital account as the share is issued which affect the stockholder equity