What is the journal entry to record the issuance of common stock?
A company issues common stock to raise money, so the debit will always be to cash. There will always be a credit to common stock for the # of shares issued x the par value. Additional paid-in capital (APIC) is the plug. If the company sells the shares for more than the par value, then you would credit APIC. IF the company sells the shares for less than the par value, then you would debit APIC.
In the example below, the company sold 500 shares for $20 per share. The par value was $5 per share, so that means that investors paid an additional $15 per share. Since the market price was higher than the par value, the plug will be a credit to APIC for $15 per share.
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What is common stock?
Common stock is the most basic form of ownership in a company. For example, when you buy a share of Apple stock in your E-Trade or Robinhood account, you are buying common stock. Common stock provides ownership in the common, as well as voting rights. However, the main drawback of common stock is that in […]