Question

Which of the following is included in the entry to record the issuance of 14,000 shares of $7 par value common stock at $21 per share cash?

Select one:
O Common Stock is credited for $294,000.
O Common Stock is debited for $98,000.
O Paid-In Capital in Excess of Par-Common is debited for $196,000.
O Cash is debited for $294,000.

Answer 1

The correct option is cash is debited for $294,000.00

Step-by-step explanation:

The cash realized from issuing common stock of 14000 shares at $21 is calculated thus:

Cash realized=$21*14000=$294,000.00

As a result cash is debited with $294,000.00

The option of crediting common with $294,000.00 does not arise because common is only meant to be credited with par value of each share multiplied by number of shares issued-that is $98,000.00($7*14000)

Common stock cannot be debited with $98000.00 as it a capital account which is usually credited with increase

Paid-in-capital in excess of par cannot be debited with $196,000.00 and should instead be credited with same amount