Question

Swarten Corporation issued 600 shares of no-par common stock for \(8,200. Prepare Swarten’s journal entry if (a) the stock has no stated value, and (b) the stock has a stated value of \)2 per share.

Short answer

If there is no stated value, the cash account is credited, and common stock is debited. But if there is a stated value, paid-in capital in excess of the stated value is also credited.

Step-by-step solution

Meaning of Common Stock

A sort of investment that indicates a corporation's ownership is referred to as "common stock." The general public elects the board of directors, and they have a role in company decisions. This form of stock ownership frequently yields larger profits over time.

Preparing Swarten’s journal entry

S.no	Particular	Folio	Debit USD $	Credit USD $
(a)	Cash A/c Dr.		8,200
	To common stock Cr.			8,200
	(being share issued at no stated value)
(b)	Cash A/c Dr.		8,200
	To common stock (600$2) Cr.			1,200
	To paid-in capital in excess Of stated value-common stock Cr.			7,000
	(being share issued at stated value)