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17 October, 00:41

Comfort Mattresses, Inc. sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share. The entry to record this transaction would be:

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  1. 17 October, 01:06
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    Debit cash for $312,000

    Credit common stock for $26,000

    Credit Paid in capital in excess of par value, common stock for $286,000.

    Explanation:

    Selling the share at $12 per share which is higher than the par value of $1 indicates that the shares are sold at a premium of $11 (i. e. $12 - $1 = $11). Therefore, there is a paid in capital in excess of par value of $11 per share.

    Before posting the entries, we do the following calculation first.

    Cash received = 26,000 * $12 = $312,000

    Common stock = 26,000 * $12 = $26,000

    Paid in capital in excess of par value = 26,000 * 11 = $286,000

    The entry to record this transaction would therefore appear as follows:

    Pariculars Dr ($) Cr ($)

    Cash 312,000

    Common stock 26,000

    Paid in capital in ex. of par v. - Common stock 286,000

    To record issue of common stock at a premium.
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