25. The Vernon Corporation was formed on January 2, 2018. The company sold 20,00

Question

25. The Vernon Corporation was formed on January 2, 2018. The company sold 20,000 shares of $8.00 par value stock for $20.00 per share. On July 1, 2018, Vernon bought back 4,000 shares of stock for $24.00 per share. The treasury stock was resold on September 1, 2018 for $32.00 per share.

Which one of the following is the entry to record the original sale of the stock?
A) DR Cash 400,000 CR Common stock 160,000 CR Paid-in capital in excess of par 240,000
B) DR Cash 400,000 CR Common stock 240,000 CR Paid-in capital in excess of par 160,000
C) DR Common stock 240,000 DR Paid-in capital in excess of par 160,000 CR Cash 400,000
D) DR Common stock 160,000 DR Paid-in capital in excess of par 240,000 CR Cash 400,000

Explanation / Answer

Journal for  original sale of the stock:

Cash a/c...Dr$400,000(20000*20)

To common stock $160,000(20000*8)

To Paid-in capital in excess of par $240,000

Hence the correct option is A.

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