Crain Company issued 2,000 shares of its $5 par value common stock in payment of its attorney's bill of $30,000. The bill was for services performed in helping the company incorporate. Crain should record this transaction by debiting
A) Legal Expense for $10,000.
B) Legal Expense for $30,000.
C) Organization Expense for $10,000.
D) Organization Expense for $30,000.

Question

Quizplus · Accepted Answer

The attorney's bill was for services performed in helping the company incorporate, which is an organization expense. The issuance of 2,000 shares of $5 par value common stock at $15 per share (totaling $30,000) is a proper way to record the payment of organization expenses. Therefore, the organization expense account should be debited for the full amount of $30,000.

Crain Company Issued 2,000 Shares of Its $5 Par Value