During its first year of operations, Cole\'s Electronics Inc. issued 1,000,000 s
ID: 2496665 • Letter: D
Question
During its first year of operations, Cole's Electronics Inc. issued 1,000,000 shares of common stock for $25 per share and issued 20,000 shares of common stock to accountants for $500,000 of professional services. The articles of incorporation authorize 5,000,000 shares of common stock with a par value of $1 per share and 1,000,000 preferred shares with a par value of $100 per share. Which of the following is the correct journal entry for these transactions?
Cash $25,000,000
Common stock (1,020,000 x $1 par) $25,000,000
Cash $25,000,000
Prepaid professional services expense $500,000
Common stock (1,020,000 x $1 par) $1,020,000
Paid in capital - excess of par $24,480,000
Cash $25,500,000
Common stock (1,020,000 x $1 par) $1,020,000
Paid in capital - excess of par $24,480,000
Cash $25,000,000
Professional services expense $500,000
Common stock $1,020,000
Paid in capital - excess of par $24,480,000
Explanation / Answer
Correct entry is :
Cash $25,000,000
Professional services expense $500,000
Common stock $1,020,000
Paid in capital - excess of par $24,480,000
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