New Corp. issues 2,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to
A) Common Stock $20,000 and Paid-in Capital in Excess of Stated Value $8,000.
B) Common Stock $28,000.
C) Common Stock $20,000 and Paid-in Capital in Excess of Par Value $8,000.
D) Common Stock $20,000 and Retained Earnings $8,000.

Question

Quizplus · Accepted Answer

The par value of common stock issued is $10 per share, and the stock is issued at $14 per share. Therefore, the total amount of common stock issued is 2,000 x $10 = $20,000, and the total amount of proceeds received is 2,000 x $14 = $28,000. The difference between the par value and the proceeds received is the amount of paid-in capital in excess of par value, which is $14 - $10 = $4 per share, or a total of 2,000 x $4 = $8,000. Therefore, the transaction should be recorded as a credit to Common Stock for $20,000 and a credit to Paid-in Capital in Excess of Par Value for $8,000, for a total credit of $28,000.

New Corp Issues 2,000 Shares of $10 Par Value Common Stock