Comfort Mattresses, Inc. sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share. The entry to record this transaction would be:

Question

Quizplus · Accepted Answer

This entry correctly reflects the issuance of common stock at a cash price per share above its $1 par value. The cash received is recorded in the debit to Cash for $312,000, the par value is recorded in the credit to Common Stock for $26,000, and the excess of the cash over the par value is recorded in the credit to Paid-in Capital in Excess of Par Value, Common Stock for $286,000. Choice A incorrectly records a Stock Liability, which is not necessary in this situation. Choice B only records the Common Stock without accounting for the cash and the excess paid. Choice D incorrectly debits the Common Stock and the Paid-in Capital in Excess of Par Value, Common Stock together, which results in an incorrect total amount. Choice E only records the Cash without accounting for the Common Stock and the excess paid.