Question

T Corporation issued 1,000 shares of $10 par value common stock at $12 per share. While recording the transaction (Debits and Credits) credits are made to what accounts?

Select one:

a. Common Stock 10,000 and Paid in capital in Excess of Stated Value 2,000

b. Accounts Payable 2,000

c. Common Stock 10,000 and Paid In Capital IN Excess of PAR 2,000

d. Common Stock 12,000

e. Cash 10,000

Answer 1

The amount credited to common stock is always equal to the number of shares issued at par value of the shares. Any excess value above par will be attributable to Paid in Capital in Excess of Par.

In this problem Cash received = 1000 x $12 = $12,000

Par value = $10

Common stock = 1000 x $10 = $10,000

Paid in capital in excess of par = 1000 x (12-10) = $2000

Journal entry will be:

Cash A/c Dr	$12000
To Common Stock A/c		$10000
To Paid in Capital in excess of PAR A/c		$2000

Hence correct option is C. Credits are made to common stock A/c and paid in capital in excess of PAR