Question

Western Wear Clothing issues 2,700 shares of its $0.01 par value common stock to provide funds for further expansion. Assuming the issue price is $11 per share, record the issuance of common stock. ?

Answer 1

The Journal entry is as follows:

Cash A/c Dr. $29,700

To common stock $27

To Additional Paid in Capital in excess of par - Common Stock $29,673

Workings:

Shares issued = 2,700

Par value common stock to provide funds for further expansion = $0.01

Issue price = $11 per share

cash = Shares issued × Issue price per share

= 2,700 × $11

= $29,700

Common Stock = Shares issued × Par value common stock

= 2,700 × $0.01

= $27

Additional Paid in Capital in excess of par - Common Stock:

= cash - Common Stock

= $29,700 - $27

= $29,673