Suppose 100 common shares are issued for $12.50 per share. The entry to record this issuance includes a:
A) credit to Retained Earnings for $1,250
B) credit to Common shares for $1,250
C) debit to Preferred Shares for $1,000
D) credit to Contributed Surplus for $250

Question

Quizplus · Accepted Answer

When common shares are issued, a credit is made to Common Shares account for the total amount of money received (in this case it is $1,250). Option A is incorrect because Retained Earnings would only be affected if the company had declared a dividend or had a net loss in a previous period. Option C is incorrect because there is no information about preferred shares. Option D is incorrect because Contributed Surplus is not affected by the issuance of common shares.

Suppose 100 Common Shares Are Issued for $12