{"id":203408,"date":"2025-03-19T18:03:08","date_gmt":"2025-03-19T18:03:08","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=203408"},"modified":"2025-03-19T18:03:09","modified_gmt":"2025-03-19T18:03:09","slug":"the-entry-to-record-the-issuance-of-common-stock-at-a-price-above-par-includes-a-debit-to","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/03\/19\/the-entry-to-record-the-issuance-of-common-stock-at-a-price-above-par-includes-a-debit-to\/","title":{"rendered":"The entry to record the issuance of common stock at a price above par includes a debit to"},"content":{"rendered":"\n

The entry to record the issuance of common stock at a price above par includes a debit to <\/p>\n\n\n\n

A. Organizational Expenses <\/p>\n\n\n\n

B. Common Stock <\/p>\n\n\n\n

C. Cash <\/p>\n\n\n\n

D. Paid-In Capital in Excess of Par-Common Stock<\/p>\n\n\n\n

The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n

The correct answer is:<\/p>\n\n\n\n

C. Cash<\/strong><\/p>\n\n\n\n

Explanation:<\/h3>\n\n\n\n

When a company issues common stock at a price above its par value, the accounting entry includes:<\/p>\n\n\n\n

    \n
  1. A debit to Cash<\/strong>: The company receives cash from investors, so it increases the Cash account (an asset).<\/li>\n\n\n\n
  2. A credit to Common Stock<\/strong>: The par value of the stock is recorded in the Common Stock account.<\/li>\n\n\n\n
  3. A credit to Paid-In Capital in Excess of Par-Common Stock<\/strong>: The amount received above the par value is recorded in this account, which represents additional paid-in capital.<\/li>\n<\/ol>\n\n\n\n

    Journal Entry Example:<\/strong><\/h4>\n\n\n\n

    Suppose a company issues 1,000 shares of common stock with a par value of $1 per share<\/strong> but sells them for $5 per share<\/strong>. The total cash received is:<\/p>\n\n\n\n

    [
    1,000 \\times 5 = 5,000
    ]<\/p>\n\n\n\n

    The accounting entry would be:<\/p>\n\n\n\n

      \n
    • Debit<\/strong> Cash: $5,000 (increases assets)<\/li>\n\n\n\n
    • Credit<\/strong> Common Stock: $1,000 (1,000 shares \u00d7 $1 par value)<\/li>\n\n\n\n
    • Credit<\/strong> Paid-In Capital in Excess of Par – Common Stock: $4,000 (the additional amount above par)<\/li>\n<\/ul>\n\n\n\n

      Why Other Options Are Incorrect:<\/strong><\/h4>\n\n\n\n
        \n
      • A. Organizational Expenses<\/strong>: These are costs related to forming a corporation and are recorded separately as an expense.<\/li>\n\n\n\n
      • B. Common Stock<\/strong>: This account is credited only for the par value of issued shares, not the entire amount received.<\/li>\n\n\n\n
      • D. Paid-In Capital in Excess of Par-Common Stock<\/strong>: While this account is credited in the entry, it is not debited.<\/li>\n<\/ul>\n\n\n\n

        Thus, the correct entry requires debiting Cash<\/strong> for the amount received.<\/p>\n","protected":false},"excerpt":{"rendered":"

        The entry to record the issuance of common stock at a price above par includes a debit to A. Organizational Expenses B. Common Stock C. Cash D. Paid-In Capital in Excess of Par-Common Stock The correct answer and explanation is : The correct answer is: C. Cash Explanation: When a company issues common stock at […]<\/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-203408","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/203408","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=203408"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/203408\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=203408"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=203408"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=203408"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}