Question

A corporation sold 13,000 shares of its $10 par value common stock at a cash price of $15 per share. The entry to record this transaction would include:

Multiple Choice

A credit to Paid-in Capital in Excess of Par Value, Common Stock for $195,000.

A debit to Paid-in Capital in Excess of Par Value, Common Stock for $65,000.

A credit to Common Stock for $195,000.

A credit to Common Stock for $130,000.

A debit to Cash for $130,000.

Answer 1

• 13000 shares were issued of $ 10 par value.

Hence, Common Stock will be credited by the amount of 13000 shares x $ 10 = $ 130,000

• Cash will be debited by the total amount of cash received which is 13000 shares x $ 15 = $ 195,000
• The difference of $ 65,000 [195000 – 130000] will be credited to Paid in Capital in Excess of Par Value.
• Hence, of all the options, Option #4- A Credit to Common Stock for $ 130,000 matches the above concept.
• Correct Answer = Option #4: A Credit to Common Stock for $ 130,000