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10 September, 18:41

Smith & Sons, Inc., is authorized to issue one million shares of $1 par value common stock. The company actually sells 250,000 shares at $5 per share. Prepare the journal entry to record the issuance of the 250,000 shares.

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  1. 10 September, 19:10
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    Dr Cash $1,250,000

    Common stock $250000

    Paid-in-share capital $1000000

    Explanation:

    The issue of 250000 shares brings additional cash of 250000*$5=$1250000 hence cash account is debited with the same amount.

    On other side, the common stock account has also increased by $250000 (250000*$1 per value of each share issued) as well as paid-in-capital account that has also increased by $1000000 (250000*$4 each per share i. e the excess of issuing price over par value)

    Paid-in-share capital is also known as share premium account and it is also a component of equity.
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Home » Business » Smith & Sons, Inc., is authorized to issue one million shares of $1 par value common stock. The company actually sells 250,000 shares at $5 per share. Prepare the journal entry to record the issuance of the 250,000 shares.
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