Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Issuing Common Stock for Assets or Services

Financial Accounting

12. Stockholders' Equity

Issuing Common Stock for Assets or Services

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Multiple Choice

When a company sells 10,000 shares of previously authorized common stock for cash, how should the transaction be recorded?

Debit Common Stock and credit Cash for the total amount received.

Debit Retained Earnings and credit Common Stock for the par value of the shares.

Debit Cash and credit Common Stock for the total amount received.

Debit Cash and credit Retained Earnings for the total amount received.

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Verified step by step guidance

Step 1: Understand the nature of the transaction. The company is selling 10,000 shares of previously authorized common stock for cash. This means the company is issuing equity and receiving cash in exchange.

Step 2: Identify the accounts involved. The two accounts affected are 'Cash' (an asset account) and 'Common Stock' (an equity account). Cash increases because the company receives money, and Common Stock increases because the company is issuing shares.

Step 3: Determine the correct journal entry. When cash is received, it is debited (increased). When common stock is issued, it is credited (increased). The journal entry will involve debiting the Cash account and crediting the Common Stock account.

Step 4: Consider the total amount received. The total amount received will be recorded in the Cash account. If the shares have a par value, the par value portion is credited to the Common Stock account, and any excess over par value is credited to an additional equity account, such as 'Paid-in Capital in Excess of Par.'

Step 5: Record the transaction in the journal. The journal entry will look like this: Debit Cash for the total amount received, Credit Common Stock for the par value of the shares, and Credit Paid-in Capital in Excess of Par for the excess amount, if applicable.