What will be the increase in the Paid-in capital in excess of par account if a corporation issues 20,000 shares of $1.00 par common stock for $6 per share?

Question

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When a corporation issues shares, the total amount received from the sale of the stock is divided into two parts: the par value that is recorded in the common stock account, and the amount received in excess of the par value, which is recorded in the "Paid-in capital in excess of par" account.
In this case, the corporation is issuing 20,000 shares of $1.00 par common stock for $6 per share. The par value portion of the proceeds will be 20,000 shares multiplied by the par value of $1.00 per share, which equals $20,000. This amount will be recorded in the common stock account.
The excess over the par value is calculated by subtracting the par value from the issue price and then multiplying by the number of shares issued. So, for each share, the excess is $6 (issue price) - $1 (par value) = $5. For 20,000 shares, the total excess is 20,000 shares * $5 excess per share = $100,000.
Therefore, the increase in the "Paid-in capital in excess of par" account will be $100,000.
The correct answer is:
c. $100,000

What Will Be the Increase in the Paid-In Capital in Excess