Question

East Asian Imports, Inc. issued 15,000 shares of stock at a stated value of $8 per share. The total issue of stock sold for $15 per share. The journal entry to record this transaction would include a

Answer 1

Answer:

Dr Cr

Cash (15,000 × $15) $225,000

Common Stock $120,000

(15000 shares × Stated value $8)

Paid-In Capital in Excess of Stated $105,000

Value - Common

($225,000 - $120,000)

Answer 2

The common stock or common shares are the owners holding in the capital of the company. They are the owners of the company who are eligible for voting and decision-making. In return, they receive dividends at fixed time intervals.

The journal entry for the issue of common stock is attached in the image below.

Working Note:

The cash amount is determined as:

$\text{Cash}= 15,000\;\text{shares} \times\ 15= \ \;225,000$

The amount of common stock is determined as:

$\text{Common Stock}= 15000 \;\text{shares} \times \text{Stated value}\; \ 8=\ 120,000$

The Paid-In Capital in Excess is the difference between the cash and common stock value.

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