Question

Daffy Duct, Inc. issued 10,000 shares of no-par value common stock at $10 per share. Miss Hap, the bookkeeper, recorded the transaction with a $100,000 debit to Cash and $100,000 credit to Common stock. Which of the following statements about this situation is correct?


A.

Total assets will be overstated.

B.

This entry is correct.

C.

Total stockholders' equity will be overstated.

D.

Total liabilities will be understated.

Answer 1

Answer:

B.  This entry is correct.

Explanation:

The journal entry to record the issuance of common stock is presented below:

Cash A/c Dr $100,000         (10,000 shares × $10)

    To Common Stock $100,000        

(Being the issuance of stock is recorded)

We debited the cash account while issuing the stock and credited the common stock in order to make the accurate posting