Q4SE - Horngren'S Financial And Managerial Accounting

Question

Journalizing issuance of stock—stated value

Nelson Corporation issued 9,000 shares of \(3 stated value common stock for \)11 per share on July 7. Record the stock issuance.

Step-by-Step Solution

Answer

Cash will be debited with $99,000; Common stock- $3 Par value will be credited with $27,000 and Paid-in Capital in excess of shares will be credited with $72,000.

Step 1: Basic calculation

$\begin{array}{rcl}\mathbf{CashReceived}& \mathbf{=}& \mathbf{NumberofShares}\mathbf{\times }\mathbf{ValuePerShare}\\ & \mathbf{=}& \mathbf{9}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{\$}\mathbf{11}\\ & \mathbf{=}& \mathbf{\$}\mathbf{99}\mathbf{,}\mathbf{000}\\ & & \end{array}$

$\begin{array}{rcl}\mathbf{CommonStock}& \mathbf{=}& \mathbf{NumberofShares}\mathbf{\times }\mathbf{ParValuePerShare}\\ & \mathbf{=}& \mathbf{9}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{\$}\mathbf{3}\\ & \mathbf{=}& \mathbf{\$}\mathbf{27}\mathbf{,}\mathbf{000}\\ & & \end{array}$

Step2: Journal entry of issuance of common stock

 

Date	Transaction	Debit	Credit
	Cash	$99,000
	Common stock- $3 Par value		$27,000
	Paid-in Capital in excess of shares		$72,000
	To record common stock issued