The entry to record the issuance of 12,500 common shares at $2.50 per share includes a:

Question

Quizplus · Accepted Answer

When issuing common shares, the company receives cash from the shareholders in exchange for the shares. The amount received is recorded as a credit to the Common Shares account, which is a component of shareholders' equity. Therefore, the correct entry would include a credit to Common Shares for the amount received, which is 12,500 shares x $2.50 per share = $31,250. The other options, including Debit to Retained Earnings, Credit to Contributed Surplus, or Credit to Retained Earnings, do not accurately reflect the transaction of issuing common shares for cash.

The Entry to Record the Issuance of 12,500 Common Shares