Q22E_1 - Horngren'S Financial And Managerial Accounting

Question

Eates Corp. issued 8,000 shares of no-par common stock for \(13 per share.

Requirements

1. Record issuance of the stock if the stock:

a. is true no-par stock.

b. has stated value of \)3 per share.

Step-by-Step Solution

Answer

a. Cash debited and common stock credited by $104,000.

b. Cash debited by $104,000, common stock credited by $24,000 and 

paid-in capital- in excess of par credited by $80,000.

Step-by-Step Solution

Step 1: Basic Introduction

$\begin{array}{c}\mathrm{CommonStock}=\mathrm{NumberofShares}\times \mathrm{ParValue}\\ =8,000\times \$13\\ =\$104,000\end{array}$

$\begin{array}{c}\mathrm{CommonStock}=\mathrm{NumberofShares}\times \mathrm{StatedValue}\\ =8,000\times \$3\\ =\$24,000\end{array}$

Step 2: Journal entry to record issuance of stock

Date	Transaction	Debit	Credit
(a)	Cash	$104,000
	Common stock		$104,000
	To record issuance of the stock
(b)	Cash	$104,000
	Common stock		$24,000
	Paid-in capital- in excess of par		$80,000
	To record issuance of the stock value $3