{"id":203401,"date":"2025-03-19T17:30:45","date_gmt":"2025-03-19T17:30:45","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=203401"},"modified":"2025-03-19T17:30:47","modified_gmt":"2025-03-19T17:30:47","slug":"the-entry-to-record-the-issuance-of-150-shares-of-5-par-common-stock-at-par-to-an-attorney-in-payment-of-legal-fees-for-organizing-the-corporation-includes-a-credit-to","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/03\/19\/the-entry-to-record-the-issuance-of-150-shares-of-5-par-common-stock-at-par-to-an-attorney-in-payment-of-legal-fees-for-organizing-the-corporation-includes-a-credit-to\/","title":{"rendered":"The entry to record the issuance of 150 shares of $5 par common stock at par to an attorney in payment of legal fees for organizing the corporation includes a credit to"},"content":{"rendered":"\n<p>The entry to record the issuance of 150 shares of $5 par common stock at par to an attorney in payment of legal fees for organizing the corporation includes a credit to <\/p>\n\n\n\n<p>A. Organizational Expenses<\/p>\n\n\n\n<p> B. Goodwill <\/p>\n\n\n\n<p>C. Common Stock <\/p>\n\n\n\n<p>D. Cash<\/p>\n\n\n\n<p><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-6-color\"><strong>The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n<p>The correct answer is:<\/p>\n\n\n\n<p><strong>C. Common Stock<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation:<\/h3>\n\n\n\n<p>When a company issues common stock, it records the transaction by crediting the <strong>Common Stock<\/strong> account for the par value of the shares issued. In this case, the company issued <strong>150 shares<\/strong> of common stock with a <strong>par value of $5 per share<\/strong> in exchange for legal services. The total par value of the issued stock is:<\/p>\n\n\n\n<p>[<br>150 \\text{ shares} \\times 5 \\text{ dollars per share} = 750 \\text{ dollars}<br>]<\/p>\n\n\n\n<p>This amount is recorded as a <strong>credit<\/strong> to the <strong>Common Stock<\/strong> account, which represents the ownership interest of shareholders.<\/p>\n\n\n\n<p>Since the stock was issued in exchange for legal services rather than cash, the corresponding <strong>debit<\/strong> entry should be recorded under <strong>Organizational Expenses<\/strong> (or Legal Expense). Organizational expenses include costs incurred in forming a corporation, such as legal fees, state incorporation fees, and other start-up costs.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Journal Entry:<\/h3>\n\n\n\n<p><strong>Debit:<\/strong> Organizational Expenses <strong>$750<\/strong><br><strong>Credit:<\/strong> Common Stock <strong>$750<\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Why Not the Other Options?<\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>A. Organizational Expenses (Incorrect as a credit)<\/strong> \u2013 While legal fees are an organizational expense, expenses are typically <strong>debited<\/strong>, not credited.<\/li>\n\n\n\n<li><strong>B. Goodwill (Incorrect)<\/strong> \u2013 Goodwill is recorded when a company acquires another business for more than its fair value, which is not the case here.<\/li>\n\n\n\n<li><strong>D. Cash (Incorrect)<\/strong> \u2013 No cash was involved in this transaction; instead, stock was issued in exchange for legal services.<\/li>\n<\/ul>\n\n\n\n<p>Thus, the correct credit entry is to <strong>Common Stock<\/strong> to reflect the issuance of shares.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The entry to record the issuance of 150 shares of $5 par common stock at par to an attorney in payment of legal fees for organizing the corporation includes a credit to A. Organizational Expenses B. Goodwill C. Common Stock D. Cash The correct answer and explanation is : The correct answer is: C. Common [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-203401","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/203401","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=203401"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/203401\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=203401"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=203401"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=203401"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}