On January 1, Year 1, Davidson Corporation issues 1,000 shares of $1 par value common stock for $20 per share. Complete the necessary journal entry for the issuance of common stock by indicating the relevant account names and dollar amounts below. If more than one account title is debited or credited, enter the account titles in their alphabetical order.
Question
On January 1, Year 1, Davidson Corporation issues 1,000 shares of 20 per share. Complete the necessary journal entry for the issuance of common stock by indicating the relevant account names and dollar amounts below. If more than one account title is debited or credited, enter the account titles in their alphabetical order.
Solution
The journal entry for the issuance of common stock would be as follows:
Debit: Cash for 20 per share)
Credit: Common Stock for 1 par value)
Credit: Paid-in Capital in Excess of Par Value for $19,000 (Cash - Common Stock)
So, the journal entry would look like this:
Cash..........................................20,000 Common Stock.....................1,000 Paid-in Capital in Excess of Par Value........19,000
This entry reflects that the company received cash from the issuance of common stock, increased its common stock at par value, and recorded the excess received over the par value as additional paid-in capital.
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