Daffy Duct,Inc.issued 10,000 shares of no-par value common stock at $10 per share.Miss Hap,the bookkeeper,recorded the transaction with a $100,000 debit to Cash and $100,000 credit to Common stock.Which of the following statements about this situation is correct?
A) Total assets will be overstated.
B) This entry is correct.
C) Total stockholders' equity will be overstated.
D) Total liabilities will be understated.

Question

Quizplus · Accepted Answer

The entry recorded by the bookkeeper is correct. When common stock is issued, cash is received and common stock is credited for the par value of the shares issued. Since no-par value common stock does not have a par value, the entire issue price of $10 per share is credited to common stock. Therefore, the initial journal entry to record the issuance of 10,000 shares of no-par value common stock at $10 per share is:
Debit Cash for $100,000
Credit Common Stock for $100,000