Question

Retro Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Retro issues 5,000 shares of common stock to pay its recent attorney's bill of $25,000 for legal services on a land access dispute, which of the following would be the best journal entry for Retro to record?a. Legal Expense 5,000Common Stock 5,000b. Legal Expense 25,000Common Stock 25,000c. Legal Expense 25,000Common Stock 5,000Paid-in Capital in Excess of Stated Value - Common 20,000d. Legal Expense 25,000Common Stock 5,000Paid-in Capital in Excess of Par value - Common 20,000

Answer 1

Answer:

d. Legal Expense 25,000Common Stock 5,000Paid-in Capital in Excess of Par value - Common 20,000

Explanation:

The legal fees will declared as expense.

The common stock issued have a face value of 1 dollar

The company issued 5,000 common stock so the common stock account will have a 5,000 x 1 = 5,000 dollar credit

The difference between the face value and the amount of the legal fees will go into additional paid-in capital in excess of par value.