Geronimo Company issued 20,000 shares of $1 par value common stock at $10 per share.Ms.Elgin,the bookkeeper,recorded this transaction with a $200,000 debit to Cash and a $200,000 credit to Common Stock.As a result of this entry:

Question

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The entry should have included a debit to Cash for $200,000,a credit to Common Stock for $20,000 (or 20,000 shares × par value of $1 per share),and a credit to Additional Paid-In Capital for $180,000 [or 20,000 shares × (issue price of $10 − par value of $1 per share)].As a result of the entry that was recorded,the Common Stock account is overstated and the Additional Paid-In Capital was understated.

Geronimo Company Issued 20,000 Shares of $1 Par Value Common