A company issues 1 million shares of common stock with a par value of $0.02 for

Question

A company issues 1 million shares of common stock with a par value of $0.02 for $15 a share. The entry to record this transaction includes a debit to Cash for:

A. $15,000,000, a credit to Common Stock for $20,000, and a credit to Additional Paid-in Capital for $14,980,000.

B. $15,000,000 and a credit to Common Stock for $15,000,000

C. $20,000 and a credit to Common Stock for $20,000.

D. $20,000, a debit to Capital Receivable for $14,980,000, a credit to Common Stock for $20,000, and a credit to Additional Paid-in Capital for $14,980,000.

A. $15,000,000, a credit to Common Stock for $20,000, and a credit to Additional Paid-in Capital for $14,980,000.

B. $15,000,000 and a credit to Common Stock for $15,000,000

C. $20,000 and a credit to Common Stock for $20,000.

D. $20,000, a debit to Capital Receivable for $14,980,000, a credit to Common Stock for $20,000, and a credit to Additional Paid-in Capital for $14,980,000.

Explanation / Answer

cash    debit         15,000,000                   [15*1000,000]

Common stock credit   20,000               [.02*1,000,000]

Additional paid in capital 14,980,000    [(15-.02) *1,000,000]

correct option is "A" - $15,000,000, a credit to Common Stock for $20,000, and a credit to Additional Paid-in Capital for $14,980,000.

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