Percy Corporation was formed on January 1.The corporate charter authorized 100,000 shares of $10 par value common stock.During the first month of operation,the corporation issued 400 shares to its attorneys in payment of a $5,000 charge for drawing up the articles of incorporation.The entry to record this transaction would include:
A)A debit to Organization Expenses for $4,000.
B)A debit to Organization Expenses for $5,000.
C)A credit to Common Stock for $5,000.
D)A credit to Paid-in Capital in Excess of Par Value,Common Stock for $5,000.
E)A debit to Paid-in Capital in Excess of Par Value,Common Stock for $2,000.

Question

Quizplus · Accepted Answer

The entry to record the issuance of 400 shares at $10 par value for a total of $5,000 would include a debit to Organization Expenses for the cost of legal services rendered, $5,000. The credit entry would be divided between Common Stock ($4,000) and Paid-in Capital in Excess of Par Value, Common Stock ($1,000).

Percy Corporation Was Formed on January 1