ABC Corporation issues 1,000 shares of $10 par value common stock at $12 per share. In recording the transaction, increases are recorded to A : Common Stock $10,000 and Preferred Stock $2,000. B : Common Stock $10,000 and Retained Earnings $2,000. C : Common Stock $12,000. D : Common Stock $10,000 and Paid-in Capital in Excess of Par-Common Stock $2,000.

Question

Leon Gonzalez

Business

28 December, 07:31

ABC Corporation issues 1,000 shares of $10 par value common stock at $12 per share. In recording the transaction, increases are recorded to A : Common Stock $10,000 and Preferred Stock $2,000. B : Common Stock $10,000 and Retained Earnings $2,000. C : Common Stock $12,000. D : Common Stock $10,000 and Paid-in Capital in Excess of Par-Common Stock $2,000.

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Cale Fitzpatrick · Answer 1

The answer is: D) Common Stock $10,000 and Paid-in Capital in Excess of Par-Common Stock $2,000.

Explanation:

The common stock must be recorded at par value at the Common Stock account.

Any extra money obtained by issuing stock and selling it over its par value has to be recorded in the Paid-in Capital in Excess of Par-Common Stock account.

On the other hand, if companies issue stock below par value, they are issuing shares at discount.