If a corporation issues 5,000 shares of $5 par value common stock for $95,000, the entry would include a credit to:
A) Common Stock for $95,000.
B) Paid-in Capital in Excess of Par for $95,000.
C) Common Stock for $70,000.
D) Paid-in Capital in Excess of Par for $70,000.

Question

Quizplus · Accepted Answer

The par value of the stock is $5, and the company is issuing 5,000 shares, which gives a total par value of $25,000 (5,000 shares x $5 par value). Since the company is receiving $95,000 for these shares and only $25,000 is attributed to the par value, the difference of $70,000 must be recorded as Paid-in Capital in Excess of Par. Therefore, the entry would include a credit to Common Stock for $25,000 and a credit to Paid-in Capital in Excess of Par for $70,000.

If a Corporation Issues 5,000 Shares of $5 Par Value