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21 March, 09:22

The 12/31/2013 balance sheet of Despot Inc. included the following: Common stock, 25 million shares at $20 par $500 million Paid-in capital-excess of par 3,000 million Retained earnings 980 million In January 2013, Despot recorded a transaction with this journal entry: Cash $150 million Common stock $100 million Paid-in capital-excess of par 50 million The transaction was for the: a. Issue of 2 million shares of common stock at par value. b. Issue of common stock for $150 million in cash. c. Receipt of $20 per share for a new stock issue. d. All of the above are correct.

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  1. 21 March, 11:05
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    b. Issue of common stock for $150 million in cash

    Explanation:

    Since the journal entry would be

    Cash A/c Dr $150 million

    To Common stock A/c $100 million

    To Paid-in capital - the excess of par $50 million

    (Being the common stock is issued)

    In this transaction, the common stock is issued for cash of $150 million in which the common stock is $100 million and the remaining balance $50 million ($150 million - $100 million) would be credited to the paid-in capital account.

    Hence, the correct option is b.
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