Alpha Company issued 1,000 shares of $10 par value common stock to stockholders, in exchange for $15,000 cash. Which of the following correctly describes the impact of this transaction on Alpha's financial statements?

Question

Quizplus · Accepted Answer

When a company issues common stock, the amount received in excess of the par value is recorded as Additional Paid-in Capital. In this case, the amount received is $15,000, but the par value of the stock is only $10 per share, meaning that the total par value of the shares is only $10,000 (1,000 shares x $10 per share). Therefore, the Additional Paid-in Capital is $15,000 - $10,000 = $5,000. The financial statements would reflect an increase in Cash of $15,000, an increase in Common Stock of $10,000, and an increase in Additional Paid-in Capital of $5,000. Therefore, choice D is correct.

Alpha Company Issued 1,000 Shares of $10 Par Value Common