Lasik Vision, Inc. began business on June 1, 2014. The corporate charter authorized issuance of 1,000 shares of no-par common stock and 4,000 shares of $6 par, 6% cumulative preferred stock. As of the beginning of 2015, 200 shares of common stock had been issued and none of the preferred stock had been issued. If the company issues 400 shares of common stock on March 1, 2015 for $10 per share, the journal entry would include a

Question

Quizplus · Accepted Answer

When common stock is issued, the journal entry includes a debit to cash for the amount received and a credit to common stock for the par value of the shares. Since the question states that the common stock has no-par value, the credit will be for the full amount received, which is $4,000 ($10 per share x 400 shares). Therefore, the correct answer is B, a $4,000 credit to common stock. There is no excess of par value over issue price in the case of no-par stock, so choices A and C are incorrect. There is also no need to credit paid-in capital in excess of par, so choice D is also incorrect.