{"id":35972,"date":"2024-04-23T07:25:23","date_gmt":"2024-04-23T07:25:23","guid":{"rendered":"https:\/\/www.greatassignmenthelp.com\/questions\/?p=35972"},"modified":"2024-04-23T07:25:23","modified_gmt":"2024-04-23T07:25:23","slug":"a-company-sells-10000-shares-of-previously-authorized-stock-at-the-par-value-of-10-per-share-whats-the-correct-entry-to-record-the-transaction","status":"publish","type":"post","link":"https:\/\/www.greatassignmenthelp.com\/questions\/a-company-sells-10000-shares-of-previously-authorized-stock-at-the-par-value-of-10-per-share-whats-the-correct-entry-to-record-the-transaction\/","title":{"rendered":"A company sells 10,000 shares of previously authorized stock at the par value of $10 per share. What’s the correct entry to record the transaction?"},"content":{"rendered":"

A company sells 10,000 shares of previously authorized stock at the par value of $10 per share. What’s the correct entry to record the transaction?<\/strong><\/p>\n

1: Debit cash $10,000, credit capital stock $10,000<\/p>\n

2: Debit capital stock $100,000, credit cash $100,000<\/p>\n

3: Debit cash $100,000, credit capita 11 stock $100,000<\/p>\n

4: Debit cash $100,000, credit treasury stock $100,000<\/p>\n

5: Debit cash $10, credit capital stock $10<\/p>\n

Answer: 1: Debit cash $10,000, credit capital stock $10,000<\/span><\/strong><\/p>\n

Explanation:<\/span><\/strong><\/p>\n

If a company sells the approved shares at the par value, the accounting entry reflects a debit of Cash Account for the sales amount and credit of the Capital Stock for the par value of the authorized shares issued.<\/span><\/p>\n

Given:<\/span><\/p>\n

Number of shares sold: One day there are 10,000.<\/span><\/p>\n

Par value per share: Imagine that you have landed into a universe that is totally different from the one you are living in. This is the very moment that you have been separated from all human beings.<\/span><\/p>\n

Calculations:<\/span><\/p>\n

The total revenue from the sale of the shares equaled to 10,000 shares x 10 dollars per share = $100,000.<\/span><\/p>\n

Value of Papers Issued = Stocks Available \u00d7 $10\/Share =$100,000.<\/span><\/p>\n

Accounting Entry:<\/span><\/p>\n

Debit Cash $100,000<\/span><\/p>\n

Credit Capital Stock $100,000<\/span><\/p>\n

Since the question asks for the correct entry to record the transaction, the appropriate option is: <\/span><\/p>\n

Asset: Debit cash balance $10,000 Credit capital stock account $10,000.<\/span><\/p>\n

This section comprised of 10,000 shares at a par value of $10 per share was sold with $100000 in cash.<\/span><\/p>\n

The other options are incorrect because:The other options are incorrect because:<\/span><\/p>\n

2. Invest: $100,000 in the means of production; cash: $100,000 (why?) (reverses the correct entry)<\/span><\/p>\n

3. Debit cash $100,000; credit capital stock $100,000 (consistently wrong)<\/span><\/p>\n

4. To debit $100,000 cash and credit $100,000 (treasury stock, which is not part of the transaction),<\/span><\/p>\n

5. Debit cash account $10 and capital stock $10 (incorrect amounts)<\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

A company sells 10,000 shares of previously authorized stock at the par value of $10 per share. What’s the correct entry to record the transaction? […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"yoast_head":"\nA company sells 10,000 shares of previously authorized stock at the par value of $10 per share. What's the correct entry to record the transaction?<\/title>\n<meta name=\"description\" content=\"A company sells 10,000 shares of previously authorized stock at the par value of $10 per share. 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