Question

Pre vall BE11.3 (LO 2) On June 1, Noonan Inc. issues 4,000 shares of no-par common stock at a cash price of $6 per share. Journalize the issuance of the shares assuming the stock has a stated value of $1 per share.

Answer 1

Solution:

Journal entry

Accounts titles and explanation	Debit($)	Credit($)
Cash a/c Dr	24,000
To Common stock a/c		4,000
To Paid in capital in excess of stated value - common stock a/c		20,000

Cash = issue shares x shares price = 4000 x 6 = 24,000

Common stock = issue shares x stated value = 4,000 x 1 = 4,000

Paid in capital in excess of stated vallue - common stock = 4000 x (6-1) = 4000 x 5 = 20,000