Question

Gothic Architecture is a new chain of clothing stores specializing in the color black. Gothic issues 1,000 shares of its $1 par value common stock at $20 per share. Record the issuance of the stock. How would the entry differ if Gothic issued no-par value stock?

Answer 1

Step-by-step explanation:

The journal entry is shown below:

1. Cash A/c Dr $20,000 (1,000 shares × $20)

To Common Stock $1,000 (1,000 shares × $1)

To Additional Paid-in Capital in excess of par - Common Stock $19,000

(The issuance of the shares is reported and the amount remaining is credited to the additional paid-in capital account)

In the case of no par value stock, the journal entry would be

Cash A/c Dr $20,000 (1,000 shares × $20)

To Common Stock A/c $20,000

(Being the issuance of the shares is recorded)