Section 6. Equity
Q31. Issuance of common stock
Entity A issued 30,000 shares of common stock at $17 per share. The par value of common stock is $1 per share.
Prepare a journal entry to record this transaction.
|Common stock, par value||30,000|
|Additional paid-in capital||480,000|
1. Increase in common stock (equity): credit
2. Increase in additional paid-in capital (equity): credit
3. The amount paid over the par value of common stock is recorded in the additional paid-in capital account.
(a) Issue price = $17 per share
(b) Par value = $1 per share
(c) Additional paid-in capital = Issue price – Par value
= $17 – $1 = $16 per share
(d) 30,000 shares x $16 = $480,000
Entity B issued 60,000 shares of common stock at $10 per share. The par value of common stock is $1 per share.
|Common stock, par value||60,000|
|Additional paid-in capital||540,000|
1. Issue price = $10 per share
2. Par value = $1 per share
3. Additional paid-in capital = $9 per share
4. 60,000 shares x $9 = $540,000