Question

If Larger Company issues 1,800 shares of $7 par value common stock for $32,400, determine the result of the transaction on the accounts. Select the correct answer. Paid-in Capital in excess of Par Value will be credited for $19,800. Cash will be debited for $12,600. Common Stock will be credited for $32,400. Paid-in Capital in excess of Par Value will be credited for $12,600.

Answer 1

The correct option is the first one,Paid-in Capital in excess of Par Value will be credited for $19,800

Step-by-step explanation:

The cash proceeds received was $32,400 which effectively means that cash account would be debited with $32,400.

The total par amount that would be credited to common stock is $12,600($7*1,800),hence the balance of $19,800 ($32,400-$12,600) belongs to paid in capital in excess of par value.

The appropriates entries therefore are:

Dr cash $32,400

Cr common stock $12,600

Cr paid in capital in excess of par value $19,800