Dawson Company issued 800 shares of no-par common stock for $7200.Which of the following would occur if the stock has stated value of $2 per share?

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Quizplus · Accepted Answer

If the stock has a stated value of $2 per share, the company must allocate a portion of the sale price to common stock and a portion to paid-in capital in excess of stated value. The common stock portion is calculated by multiplying the number of shares (800) by the stated value per share ($2), which equals $1600. The remainder of the sale price ($7200 - $1600 = $5600) is allocated to paid-in capital in excess of stated value. Therefore, the journal entry to record the issuance of the stock would be to increase cash for $7200, increase common stock for $1600, and increase paid-in capital in excess of stated value for $5600.

Dawson Company Issued 800 Shares of No-Par Common Stock for $7200.Which