John's Metalworks Incorporated recently issued 10,000 shares of stock in exchange for $100,000.Metal works' journal entry to record this transaction included:
A)A debit to Capital Stock for $10,000.
B)A debit to Cash for $100,000.
C)A credit to Capital Stock for $10,000.
D)A credit to Cash for $100,000.

Question

Quizplus · Accepted Answer

When a company issues stock and receives cash in exchange, the journal entry involves a debit to Cash (to record the increase in assets) and a credit to Capital Stock (to record the increase in equity). Therefore, option B is the correct choice as it represents both the debit and credit portions of the journal entry. Option A and C only reflect one side of the transaction and option D has the wrong debit/credit combination.

John's Metalworks Incorporated Recently Issued 10,000 Shares of Stock in Exchange