A company issued 60 shares of $100 par value common stock for $7,000 cash. The journal entry to record the issuance is:

Multiple Choice:

O Debit Cash $7,000; credit Common Stock $7,000.

O Debit Investment in Common Stock $7,000; credit Cash $7,000.

O Debit Cash $7,000; credit Common Stock $6,000; credit Paid-in Capital in Excess of Par Value, Common Stock $1,000.

O Debit Common Stock $6,000, debit Investment in Common Stock $1,000; credit Cash $7,000.

O Debit Cash $7,000; credit Paid-in Capital in Excess of Par Value, Common Stock $6,000, credit Common Stock $1,000.

Debit Cash $7,000; credit Common Stock $6,000; credit Paid-in Capital in Excess of Par Value, Common Stock $1,000.

Explanation:

Since we are receiving cash $7,000 by issuing stocks, therefore the cash would be debited by $7,000 We credited the common stock by $6,000 because in common stock account we record only par value of stock. The calculation for common stock is:

⇒ Shares issued * Par Value

⇒ 60 * 100

⇒ $6,000

The excess amount received by issuing stock are credited and recorded as Paid-in-Capital in excess of Par Value, which is $1,000 in our case.

Journal Entry

Cash 7,000

Common Stock 6,000

Paid-in Capital in Excess of Par Value 1,000