A corporation issued 2,500 shares of its no par common stock at a cash price of $11 per share.The entry to record this transaction would be:
A)Debit Cash $27,500;credit Paid-in Capital in Excess of Par Value,Common Stock $2,500;credit Common Stock $25,000.
B)Debit Cash $27,500;credit Common Stock $27,500.
C)Debit Common Stock $27,500;credit Cash $27,500.
D)Debit Treasury Stock $27,500;credit Cash $27,500.
E)Debit Treasury Stock $2,500;debit Paid-in Capital in Excess of Par Value,Treasury Stock $25,000;credit Common Stock $27,500.

Question

Quizplus · Accepted Answer

When a corporation issues common stock for cash, the entry should debit Cash for the total amount received ($11 x 2,500 = $27,500) and credit Common Stock for the par value ($25,000 in this case) with the excess credited to Paid-in Capital in Excess of Par Value, Common Stock. Since this is a no par stock, we do not need to account for the excess. Therefore, the correct entry is Debit Cash $27,500 and credit Common Stock $25,000 and credit Paid-in Capital in Excess of Par Value, Common Stock $2,500. Choice B is the closest one.

A Corporation Issued 2,500 Shares of Its No Par Common