If a company issues 1,000 shares of $1 par value common stock for $20 per share,what would be the effect on the accounting equation?

Question

Quizplus · Accepted Answer

When a company issues common stock, it receives cash (an asset) for the sale of the stock. Since the stock has a par value of $1 per share, a portion of the cash received is recorded as common stock (part of stockholders' equity) and the remainder is recorded as additional paid-in capital (also part of stockholders' equity). Therefore, the issuance of 1,000 shares of $1 par value common stock for $20 per share would increase both assets (cash) and stockholders' equity (common stock and additional paid-in capital).

If a Company Issues 1,000 Shares of $1 Par Value