Liberward, Inc. sold and issued 1,000 shares for $15 per share. The book value of the shares was $10 per share. The journal entry to record the share issue would include which of the following?

Question

Quizplus · Accepted Answer

When shares are issued, the company receives cash in exchange for the shares. This cash received is recorded as a debit to Cash. The company also records the shares issued as an increase in Contributed capital, which is recorded as a credit to this account. In this case, Liberward, Inc. received $15 per share, which is higher than the book value of $10 per share. Therefore, the credit to Contributed capital should be for the full $15,000 ($15 per share x 1,000 shares issued).