A corporation was formed on January 1.The corporate charter authorized 100,000 shares of $10 par value common stock.During the first month of operation,the corporation issued 300 shares to its attorneys in payment of a $5,000 charge for drawing up the articles of incorporation.The entry to record this transaction would include:
A)A debit to Organization Expenses for $3,000.
B)A debit to Organization Expenses for $5,000.
C)A credit to Common Stock for $5,000.
D)A credit to Contributed Capital in Excess of Par Value,Common Stock,for $5,000.
E)A debit to Contributed Capital in Excess of Par Value,Common Stock,for $2,000.

Question

Quizplus · Accepted Answer

The issuance of 300 shares of common stock at $10 par value for a total of $5,000 would result in a credit to Common Stock for $3,000 (300 shares x $10 par value) and a credit to Contributed Capital in Excess of Par Value, Common Stock for $2,000 ($5,000 - $3,000). There is no debit to Organization Expenses since this charge is for legal fees and not organizational expenses.

A Corporation Was Formed on January 1