Stockholder’s Equity

Question 1

Jensen performed services for Balm Co. Jensen accepted 1,000 shares of $5 par common stock in Balm as payment for his services. The Balm shares were not yet publicly traded, but they had a book value of $4 per share. Jensen provided 48 hours of service, which is billed at $125 per hour. By what amount should the common stock account increase?

Answer 1

$5,000

Common stock account will increase by the number of shares issued multiplied by the par value of the shares (1,000 shares x $5)