Nexis Corp. issues 1,000 shares of $15 par value common stock at $22 per share. When the transaction is recorded, credits are made to:
A) Common Stock $15,000 and Paid-in Capital in Excess of Par Value $7,000.
B) Common Stock $22,000 and Retained Earnings $15,000.
C) Common Stock $7,000 and Paid-in Capital in Excess of Stated Value $15,000.
D) Common Stock $22,000.

Question

Quizplus · Accepted Answer

The par value of the stock is $15 per share, therefore 1,000 shares would have a total par value of $15,000. Since the shares were sold for $22 per share, the excess over the par value is $7 per share, resulting in a total excess of $7,000 (1,000 shares x $7 per share). Therefore, credits must be made to Common Stock for the par value of $15,000 and to Paid-in Capital in Excess of Par Value for the excess amount of $7,000.