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17 March, 17:13

A company issued 60 shares of $100 par value common stock for $7,000 cash. The journal entry to record the issuance is:

Multiple Choice:

O Debit Cash $7,000; credit Common Stock $7,000.

O Debit Investment in Common Stock $7,000; credit Cash $7,000.

O Debit Cash $7,000; credit Common Stock $6,000; credit Paid-in Capital in Excess of Par Value, Common Stock $1,000.

O Debit Common Stock $6,000, debit Investment in Common Stock $1,000; credit Cash $7,000.

O Debit Cash $7,000; credit Paid-in Capital in Excess of Par Value, Common Stock $6,000, credit Common Stock $1,000.

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Answers (1)
  1. 17 March, 19:07
    0
    Debit Cash $7,000; credit Common Stock $6,000; credit Paid-in Capital in Excess of Par Value, Common Stock $1,000.

    Explanation:

    Since we are receiving cash $7,000 by issuing stocks, therefore the cash would be debited by $7,000 We credited the common stock by $6,000 because in common stock account we record only par value of stock. The calculation for common stock is:

    ⇒ Shares issued * Par Value

    ⇒ 60 * 100

    ⇒ $6,000

    The excess amount received by issuing stock are credited and recorded as Paid-in-Capital in excess of Par Value, which is $1,000 in our case.

    Journal Entry

    Cash 7,000

    Common Stock 6,000

    Paid-in Capital in Excess of Par Value 1,000
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