Question

The 12/31/2018 balance sheet of Despot Inc. included the following:

Common stock, 25 million shares at $20 par $ 500 million
Paid-in capital—excess of par 3,000 million
Retained earnings 980 million

In January 2018, Despot recorded a transaction with this journal entry:
Cash 150 million
Common stock 100 million
Paid-in capital—excess of par 50 million

The transaction was for the:

Answer 1

The $150 million cash received is for a new issue of 5 million common stock Step-by-step explanation:

The number of shares issue =amount credited to common stock/par value of share

amounted credited to common stock is $100 million

par value of share is $20

the number shares issued =$100,000,000/$20

=5,000,000 shares

premium amount per share =excess paid-in capital.number of shares issued

excess paid-in capital is $50 million

premium amount per share=$50,000,000/5,000,000

=$10 per share

All in all, the $150 million cash received is for a new issue of 5 million common stock