Strength Inc.sold 10,000 shares of $1 par value stock for $25 per share.How would the company record this transaction?
A)Debit Cash for $250,000 and credit Common Stock,$1 Par Value for $250,000.
B)Debit Cash for $240,000 and credit Common Stock,$1 Par Value for $240,000.
C)Debit Cash for $250,000,credit Common Stock,$1 Par Value for $10,000,and credit Paid-In Capital,Common Stock for $240,000.
D)Debit Cash for $240,000,credit Common Stock,$1 Par Value for $10,000,and credit Paid-In Capital,Common Stock for $230,000.
E)Debit Cash for $240,000,debit credit Paid-In Capital,Common Stock for $10,000,and credit Common Stock,$1 Par Value for $250,000.

Question

Quizplus · Accepted Answer

The company will debit Cash for the total amount received, which is $250,000. However, since the stock has a par value of $1, the company will credit Common Stock, $1 Par Value for 10,000 shares, or $10,000. The remaining amount, which is $240,000, will be credited to Paid-In Capital, Common Stock. This is because the shares were sold for more than their par value, resulting in additional contribution from the shareholders, which is recorded as paid-in capital.