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6 July, 16:19

A corporation issued 5,000 shares of its no par common stock that was assigned a $1 stated value per share. The issue price was $10 per share. The entry to record this transaction would be:

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  1. 6 July, 18:59
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    Debit Cash account $50,000

    Credit Ordinary share $5,000

    Credit Share Premium $45,000

    Explanation:

    When share issued are paid for at an amount above the par or ordinary value, the excess paid is known as share premium.

    The share premium like the par or ordinary value is recognized in the balance sheet as a part of the owners equity.

    For a stock unit at par value of $1 for which the issue price was $10,

    the share premium per unit

    = $10 - $1

    = $9

    Ordinary share value = $1 * 5000 = $5,000

    Share premium amount = $9 * 5,000 = $45,000
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