A corporation issued 5,000 shares of its $1 par value stock at $16 per share. The entry to record this transaction would be:
A)Debit Cash $80,000; credit Paid-in Capital in Excess of Par Value, Common Stock $5,000; credit Common Stock $75,000.
B)Debit Cash $80,000; credit Common Stock $80,000.
C)Debit Cash $80,000; credit Common Stock $5,000; credit Paid-in Capital in Excess of Par Value, Common Stock $75,000.
D)Debit Treasury Stock $80,000; credit Cash $80,000.
E)Debit Common Stock $80,000; debit Paid-in Capital in Excess of Par Value, Common Stock $5,000; credit Cash $75,000.

Question

Quizplus · Accepted Answer

When a corporation issues stock at a price higher than its par value, the excess amount is recorded as Paid-in Capital in Excess of Par Value, Common Stock. In this case, the stock is issued at $16 per share while the par value is $1 per share, so the excess amount is $15 ($16 - $1). The entry to record this transaction would be to debit Cash for the total amount received ($80,000) and credit Common Stock for the par value of the shares issued ($5,000) and credit Paid-in Capital in Excess of Par Value, Common Stock for the excess received ($75,000). Therefore, the correct answer is C.

A Corporation Issued 5,000 Shares of Its $1 Par Value