Question

hen a company issues 37,000 shares of $1 par value common stock for $10 per share, the journal entry for this issuance would include:

Answer 1

The journal entry for issuing 37,000 shares of $1 par value stock at $10 per share includes debiting Cash for $370,000, crediting Common Stock for $37,000, and crediting Additional Paid-In Capital for $333,000.

Step-by-step explanation:

When a company issues 37,000 shares of $1 par value common stock for $10 per share, the following journal entry is recorded to reflect this transaction:

1. Debit Cash for the total amount received (37,000 shares × $10 per share).
2. Credit Common Stock for the par value (37,000 shares × $1 par value).
3. Credit Additional Paid-In Capital for the excess of the amount received over the par value [(37,000 shares × $10) - (37,000 shares × $1)].

The gain from issuing stock is called a capital gain, which occurs when the value of stock increases between the time it is bought and when it is sold.

Journal Entry for Stock Issuance Example:

• Debit Cash $370,000 (37,000 shares × $10/share)
• Credit Common Stock $37,000 (37,000 shares × $1 par value)
• Credit Additional Paid-In Capital $333,000 ([$370,000 cash received] - [$37,000 common stock par value])