Suppose Home Decor Imports issued 200,000 shares of $0.07 par common stock at $4 per share. This is due to a lack of interest from investors and there is only one investor is willing to pay $8 per share for 1,000 shares. Common stock can be issued in exchange for noncash assets such as land, buildings, or equipment and for services (e.g., legal, accounting, consulting). Therefore, the amount that a corporation received, both cash or non-cash assets, becomes the legal capital; hence such amount is recorded entirely as common stock. that should appear in the company’s 2022 income statement is: The Contra Costa Times Company reported a $17,200 liability in its 2021 balance, sheet for subscription revenue received in advance. How can this journal entry balance? Preferred Stock: Overview, Types, Valuation and Example. Below is the journal entry for issuance of common stock at a premium: The contributed capital in excess of par value of $100,000 is added and presented in the equity section of Balance Sheet. Cost of registering and issuing common stock are usually deducted from the proceeds: reduce Cash and Paid-in Capital in Excess of Par Value (Stated Value). Common and Preferred Stock As such a transaction represents a noncash transaction, the cost principle should be applied: the cost equals the cash equivalent price (i.e., the fair market value). In each case the term deposit journal entries show the debit and credit account together with a brief narrative. Let’s assume that ABC Corporation issues 50,000 shares with the par value of $10 per share for cash of $500,000. (Issued 50,000 shares of $10 par value of commons stock at par), Contributed Capital in Excess of Par Value, Common Stock, (Issued 50,000 shares of $10 par value of commons stock at $12 per share), (Issued1,000 shares of $10 par value of commons stock at $8 per share), (Issued 1,000 shares of no par value of commons stock at $50 per share), Capital Contribution in Excess of Stated Value, Common Stock, (Issued1,000 shares of $50 stated value of commons stock at $60 per share), Capital Contribution in Excess of Par Value, Common Stock, (Issued 10,000 shares of $10 par value of commons stock in exchange for land with market value of $150,000). For example, a cash receipt of $8 per share for common stock of $10 par value. The journal entries are as follows: January 1, 2018 – The grant date. Designed by Elegant Themes | Powered by WordPress, Journal Entry for Issuance of Common Stock. For example, a cash receipt of $12 per share for common stock of $10 par value. I am working on a study guide. 1 decade ago. The journal entry for such issuing stated value of common stock is as follows: The common stock, sometimes, is issued for non-cash assets; for example in exchange for land or building, or sometimes in exchange for not paying organization expenses to the promoters. This discount on common stock is not an expense in the income statement; however, as mentioned above, it is treated as a reduction of par value common stock which is presented in the balance sheet. In the December 31, 2022, balance sheet, the, amount of prepaid insurance was correctly shown as $1,000. Rispondi Salva. QS 13-5 Issuance of common stock LO P Prepare the issuer's journal entry for each of the following separate transactions a. Common stock is a type of stock that gives the right to the common stockholders to have an equal right to vote at the meeting and receive the same dividend. The journal entry to record the issuance of a stock dividend is to: a) debit Common Stock Dividend Distributable (number of shares times par value common stock); credit Common Stock (same). A brief explanation and journal entries for all the situations are given below: (1) At par: When stock is issued at a price equal to its par value, it is said to be issued at par. There is also an elimination from the additional paid-in capital account of the $1,100,000 originally paid into that account. The structure of a journal entry for the cash sale of stock depends upon the existence and size of …   Terms. First; let’s understand what is common stock? This is because there might not be enough assets to recover the debt owed to creditors in case of default. In the later section below, we will illustrate how to record the journal entry for the issuance of common stock. (b) On April 1, GT Co. issues no-par value common stock for $50,000 cash. The journal entry to record the issuance of a stock dividend: Debit Retained Earnings, Credit Common Stock Distributable, Credit Paid-in Capital in Excess of Par. When a corporation issues par value of the common stock, it can be issued at par, at a premium, or a discount. (b) On April 1, GT Co. issues no-par value common stock for $50,000 cash. In this article, we cover how to account for the issuance of common stock. Copyright © 2021. On April 1, OP Co. issues no-par value common stock for $78,000 cash c. $2 stated value and sell for $18 cash per share. 57 cash per share View transaction list Journal entry worksheet Record the issuance of 67,000 shares of $6 par value common stock assuming the shares sell for $6 cash per share. QS 13-2 Issuance of common stock Prepare the journal entry to record each separate transaction. How to Calculate Cost of Preferred Stock? In order to easily illustrate this, let’s assume that ABC Corporation issues 10,000 shares at $10 par value per share in exchange for land with the market value of $150,000 at the date of issuance.