Stock Issuance Flashcards
How is a cash sale of common stock handled?
Debit Cash
Credit Par or stated value of stock
Any excess will be put into an account such as “Contributed Capital in excess of par (common)”
When stock is sold on a subscription basis, what is required to be specified in the contract?
a. ) Share price
b. ) Number of shares
c. ) Payment dates
How is stock sold on a subscription basis?
The implication is that the selling price of the stock will be received in a series of payments from the shareholder. Once the full amount is received the stock will be issued.
How is stock issued for nonmonetary consideration valued?
Fair value of stock or consideration, whichever is more reliable
What is the classification of the stock subscriptions receivable account?
Contra owners’ equity (contra common stock subscribed)
What is the basis of allocation for stock basket sale proceeds?
Fair value of individual stocks in the basket.
Describe the journal entry to record initial payment of stocks sold on subscriptions
DR: Cash
DR: Subscription Receivable
CR: Common Stock Subscriptions
CR: Additional Paid in Capital (contract price-par).
What is a basket sale?
When two or more securities are bundled together and sold in a single transaction
How are stock issue costs accounted for?
This reduces the contributed capital in excess of par account. No future benefit, so therefore not included in amortization. This can be netted against the proceeds of the stock
