A firm issued 5,000 shares of $1 par-value common stock, receiving proceeds of $20 per share. The accounting entry for the paid-in capital in excess of par account is

Question

Quizplus · Accepted Answer

The paid-in capital in excess of par account represents the amount of money received from the sale of shares over and above their par value. In this case, the par value per share is $1, and the firm sold each share for $20. Therefore, the paid-in capital in excess of par account is calculated as follows:

Paid-in capital in excess of par = (Issue price per share - Par value per share) x Number of shares issued
= ($20 - $1) x 5,000
= $95,000

The accounting entry for this transaction will be:

Debit: Cash - $100,000
Credit: Common stock (par value) - $5,000
Credit: Paid-in capital in excess of par - $95,000

A Firm Issued 5,000 Shares of $1 Par-Value Common Stock