Question

Penne Pharmaceuticals sold 15 million shares of its $1 par common stock to provide funds for research and development. If the issue price is $12 per share, what is the journal entry to record the sale of the shares? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Answer 1

To record Penne Pharmaceuticals' sale of 15 million shares at $12 per share, the journal entry is a debit to Cash for $180 million and credits to Common Stock for $15 million and to Additional Paid-in Capital for $165 million.

Step-by-step explanation:

Penne Pharmaceuticals sold 15 million shares of its $1 par common stock at an issue price of $12 per share. The journal entry to record the sale of shares is a debit to cash for the total amount received and a credit to common stock for the par value of the shares issued and to additional paid-in capital (or share premium) for the amount received over the par value.

Journal Entry:

• Debit Cash of $180 million
• Credit Common Stock $15 million
• Credit Additional Paid-in Capital $165 million

Answer 2

Step-by-step explanation:

The journal entry is as follows

Cash A/c Dr $180,000,000 ($15,000,000 × $12)

To Common stock $15,000,000 ($15,000,000 × $1)

To Paid in capital in excess of par - Common stock A/c $165,000,000

(Being the sale of the shares is recorded)

The remaining amount left i.e transferred to the paid in capital in excess of par value of common stock

= $180,000,000 - $15,000,000

= $165,000,000