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:

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The payment of $5,000 in exchange for 300 shares of $10 par value common stock means that the attorneys were issued shares at a price of $16.67 per share [($5,000 ÷ 300) = $16.67]. This is greater than the par value of $10 per share, so there is a credit to Common Stock for the par value amount of $3,000 (300 shares x $10 per share = $3,000) and a debit to Paid-in Capital in Excess of Par Value, Common Stock for the difference between the proceeds received and the par value of the shares ($5,000 - $3,000 = $2,000). There is no debit to Organization Expenses because the payment was not for expenses incurred in organizing the corporation, but rather for legal services rendered in drawing up the articles of incorporation.

A Corporation Was Formed on January 1