A corporation issued 100 shares of its $5 par value common stock in payment of a $1,800 charge from its accountant for assistance in filing its charter with the state.The entry to record this transaction will include:
A)A $1,800 credit to Common Stock.
B)A $300 debit to Organization Expenses.
C)A $1,300 credit to Paid-in Capital in Excess of Par Value,Common Stock.
D)A $1,800 debit to Legal Expenses.
E)A $1,800 credit to Cash.

Question

Quizplus · Accepted Answer

The corporation issued 100 shares of its $5 par value common stock, which means the total amount of par value is $500. However, the corporation received services worth $1,800, which is more than the par value received. Therefore, $500 will be credited to Common Stock, and the remaining $1,300 will be credited to Paid-in Capital in Excess of Par Value, Common Stock. This transaction has nothing to do with legal expenses or organization expenses, so options B and D are incorrect. Lastly, while cash was involved, it is not the account that needs to be credited to reflect the issuance of stock, so option E is also incorrect.

A Corporation Issued 100 Shares of Its $5 Par Value