If a corporation issues 1,000 shares of $1 par value common stock at $5 per share, how should the transaction be accounted for?
A)debit cash for $5,000 and credit common stock for $5,000
B)debit cash for $5,000 and credit common stock for $1,000 and credit additional paid-in capital for $4,000
C)debit cash for $5,000 and credit common stock for $1,000 and credit retained earnings for $4,000
D)credit cash for $5,000 and debit common stock for $5,000
E)debit common stock for $1,000 and debit retained earnings for $4,000 and credit cash for $5,000

Question

Quizplus · Accepted Answer

The transaction should be accounted for as follows:
Debit cash for $5,000 (the amount received from the issuance of the shares)
Credit common stock for $1,000 (the par value of the shares issued)
Credit additional paid-in capital for $4,000 (the excess of the issue price over the par value of the shares issued)

If a Corporation Issues 1,000 Shares of $1 Par Value