Which of the following entries records the purchase of common stock by stockholders?
A)debit Common Stock; credit Accounts Receivable
B)debit Cash; credit Common Stock
C)debit Dividends; credit Cash
D)debit Dividends; credit Common Stock

Question

Which of the following entries records the purchase of common stock by stockholders?
A)debit Common Stock; credit Accounts Receivable
B)debit Cash; credit Common Stock
C)debit Dividends; credit Cash
D)debit Dividends;  credit Common Stock

Quizplus · Accepted Answer

When stockholders purchase common stock, they typically pay cash to the company in exchange for the stock. Therefore, the appropriate journal entry would be to debit Cash and credit Common Stock to reflect the increase in both assets and owner's equity. Choices A and D do not reflect a transaction related to the purchase of stock by stockholders, and choice C records the payment of dividends to stockholders, not their purchase of stock.

Which of the Following Entries Records the Purchase of Common