A corporation issued 5,000 shares of its no par common stock that was assigned a $1 stated value per share. The issue price was $10 per share. The entry to record this transaction would be:

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Business

Freddy Landry

21 February, 06:32

A corporation issued 5,000 shares of its no par common stock that was assigned a $1 stated value per share. The issue price was $10 per share. The entry to record this transaction would be:

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Mauricio Reyes · Answer 1

Debit Cash account $50,000

Credit Ordinary share $5,000

Credit Share Premium $45,000

Explanation:

When share issued are paid for at an amount above the par or ordinary value, the excess paid is known as share premium.

The share premium like the par or ordinary value is recognized in the balance sheet as a part of the owners equity.

For a stock unit at par value of $1 for which the issue price was $10,

the share premium per unit

= $10 - $1

= $9

Ordinary share value = $1 * 5000 = $5,000

Share premium amount = $9 * 5,000 = $45,000