Gothic Architecture is a new chain of clothing stores specializing in the color black. Gothic issues 1,000 shares of its $1 par value common stock at $30 per share. Record the issuance of the stock. How would the entry differ if Gothic issued no-par value stock?

a). The record of the issuance of the stock is debit to cash for $30,000, credit to common stock for $1,000 and credit to excess of common stock of $29,000.

b). If the Gothic company issued no-par value stock, the entry would be a debit for the total amount of cash received from the issue which will be ($30,000) and to balance the account, a credit to Common Stock for the $30,000 also. The paid in capital in excess of common stock would not be credited.

Explanation:

A. Entries of the stock

1. Account (cash)

Cash=1000 shares at $30 per share

Cash=1,000*30=$30,000

Debit=$30,000

Credit this account=$0

2. Account (common stock)

Common stock=1,000 shares at $1 per value common stock

Common stock=1,000*1=$1,000

Credit account=$1,000

Debit this account=$0

3. Account (Paid-in Capital in Excess of Par - Common Stock)

Paid in capital in excess of par-common stock=30,000-1,000=$29,000

Credit this account=$29,000

Debit this account=$0

This can be written as;

Account Debit ($) Credit ($)

Cash (1,000 shares * $30 price) 30,000

Common Stock (1,000 shares * $1 par) 1,000

Paid-in Capital in Excess of Par - Common Stock 29,000

The record of the issuance of the stock is debit to cash for $30,000, credit to common stock for $1,000 and credit to excess of common stock of $29,000.

B.

If the Gothic company issued no-par value stock, the entry would be a debit for the total amount of cash received from the issue which will be ($30,000) and to balance the account, a credit to Common Stock for the $30,000 also. The paid in capital in excess of common stock would not be credited.