Thompson​ Company's common stock carries a par value of $ 1 per share. The company is authorized to issue an additional 12000 shares of common stock. What would the journal entry be for the issuance of 2500 shares of common stock at par​ value?

Answer 1

When a company issues common stock at par value, the journal entry will typically involve debiting the cash account for the amount received and crediting the common stock account for the par value of the shares issued. Here’s how you would make the journal entry for Thompson Company issuing 2,500 shares of common stock at a par value of $1 per share:

1. Calculate the total par value of the shares issued: \[ \text{Total Par Value} = \text{Number of Shares} \times \text{Par Value per Share} = 2,500 \times 1 = 2,500 \]

2. Journal Entry:

   • Debit Cash: This amount will reflect the cash received from the issuance of stock.
   • Credit Common Stock: This account will reflect the par value of the issued shares.

The journal entry would look like this:

Date            Account Title            Debit          Credit
------------------------------------------------------------------
[Date]         Cash                     $2,500
               Common Stock                           $2,500

In this entry:

• Cash is debited for $2,500 (assuming the shares were issued for cash).
• Common Stock is credited for $2,500, reflecting the par value of the shares issued.

If there were no additional paid-in capital (i.e., the shares were issued at par value), the entire cash amount would be reflected in the Common Stock account. If shares were issued above par, any excess would be recorded in an additional paid-in capital account, but that scenario doesn't apply here since the shares are issued at par value.