Question

Alma Corp. issues 1,000 shares of $10 par value common stock at $16 per share. When the transaction is recorded, credits are made to:

a. Common Stock $16,000.
b. Common Stock $10,000 and Paid-in Capital in Excess of Par Value $6,000.
c. Common Stock $10,000 and Paid-in Capital in Excess of Stated Value $6,000.
d. Common Stock $10,000 and Retained Earnings $6,000.

Answer 1

Answer:

The correct answer is Option is B.

Explanation:

The par value of shares is simply the stated value of shares in the company's books, as set out in the company's charter.

The full necessary journals to record the above transactions are:

Debit Cash (1,000 x $16)                                                      $16,000

Credit Common stock (1,000 x $10)                                    $10,000

Credit Paid-in capital in excess of par value - common      $6,000

(To record issuance of common stock)

So, the correct option is B.