Canton,Inc.issued 10,000 shares of $1 par value common stock at $10 per share.Mr.Smart,the bookkeeper,recorded this transaction with a $100,000 debit to Cash and a $100,000 credit to Common stock.As a result of this entry:
A) total assets will be overstated.
B) Additional Paid-In Capital will be understated.
C) total stockholders' equity will be understated.
D) equity will be overstated.

Question

Quizplus · Accepted Answer

The entry should have credited Common Stock for $10,000 (10,000 shares x $1 par value) and Additional Paid-In Capital for $90,000 (the excess over par value). Mr. Smart's entry failed to credit Additional Paid-In Capital, understating it.