Question

Lewis Corporation issued 125,000 shares of $5 par value capital stock at date of incorporation for cash at a price of $9 per share. During the first year of operations, the company earned $140,000 and declared a dividend of $100,000.

At the end of this first year of operations, the balance of the Capital Stock account is:


a) $765,000. b) $1,000,000. c) $625,000. d) $665,000.

Answer 1

c) $625,000

Step-by-step explanation:

Capital account has value of capital issued. It includes the Common stock Capital account and Paid in capital excess of par account. Value up to the par are recorded in the common stock capital account and value over the par value is recorded in the Paid in capital excess of par.

Stock Capital = Numbers of shares x Par Value of Share

Stock Capital = 125,000 shares x $5 = $625,000