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Big Centex Corporation issued 2,000 shares of $10 par value common stock at $17 per share. When the transaction is recorded, credits are made to: Group of answer choices Common Stock, $34,000 Cash, $34,000 Common Stock, $20,000 and Paid-In Capital in Excess of Par Value, $14,000 Common Stock, $14,000 and Paid-In Capital in Excess of Par Value, $20,000

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Answer:

Big Centex Corporation

When the transaction is recorded, credits are made to:

Common Stock, $20,000 and Paid-In Capital in Excess of Par Value, $14,000

Explanation:

a) Data and Calculations:

Issue of shares = 2,000

Par value of common stock = $10

Issue price = $17 (shares are issued at a premium of $7 per share.)

Common stock value = $20,000 (2,000 * $10)

Paid-in Capital in Excess of Par Value = $14,000 (2,000 * $7)

b) The shares of Big Centex Corporation have been issued at a premium, that is at a value or price which is above the par value of $10.  The premium is $7.  Therefore, the Common Stock will be credited with $20,000 representing the par value of the issued stock while the Paid-In Capital in Excess of Par Value will be credited with the excess or premium.  These separate credits separate the premium per share from the par value of the issued shares.

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