Question

On April 1, 10,000 shares of $20 par common stock were issued at $24.

Required:
Illustrate the effects on the accounts and the financial statements.

Answer 1

The journal entry to record this transaction would be:

April 1, 10,000 shares issued

Dr Cash 240,000

Cr Common stock 200,000

Cr Additional paid in capital 40,000

The balance sheet is affected:

Assets = Liabilities + Stockholders' equity

Cash = NA Common stock APIC

$240,000 $200,000 + $40,000

increases increases increases

The cash flow statement is also affected since cash from financing activities increases by $240,000. The statement of shareholders' equity is also affected because equity increases by $240,000.

The income statement is not affected.