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May 1, 2010, Mr. Medford incorporated Medford Moving Co.. Medford Moving Co. issued 100,000 common shares....

  1. May 1, 2010, Mr. Medford incorporated Medford Moving Co.. Medford Moving Co. issued 100,000 common shares. The par value per share is $1, and the company got $300,000 from issuing shares.

How can the company get $300,000 issuing shares if there are only 100,000 shares and par value per share is $1? Does there need to be two separate journal entries to account for this?

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Answer #1

The company issued 100,000 shares and has the par value of $1. However, the company received $300,000 from the issue of shares. A company can receive the higher value than the par value of shares by issuing the shares on the premium. Medford Moving Co. could have issued those shares on the premium.

There is no need for two seperate journal entries. only a single journal entry can be recorded for the issue of common shares. Following is the journal entry to record the issue of common shares on premium.

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