Answer:
A. Recognizes $24,000 of expense.
Explanation:
The fees expense will be equivalent to the market value of the common stock.
The company will issue 2,000 shares which market price is $12 per share
2,000 x $12 = 24,000 total cost for the services.
Which will be pposted for common stock and additional paid-in common stock
fees expense 24,000 debit
common stock 10,000 credit (5,000 x 2)
additional paid-in CS 14,000 credit
Answer:
C) Increases contributed capital in excess of par $10,000.
Explanation:
Since Renwood is exchanging common stock for performed services, it must increase equity by $20,000 which records the stock price when the contract was signed. The contract included 2,000 stocks at $10 per stock = $20,000
Whenever a stock is issued and the firm obtains more money than par value, it must record the common stock at par value and recognize the difference in the additional paid-in capital to par value account. The journal entry to record this transaction should be:
Dr Services expense 20,000
Cr Common stock 10,000
Cr Additional paid-in capital of par value 10,000
