Question

A company issues 100 shares and received $2,000. with the proceeds pays $200 in legal fees, accounting fees, underwriting commissions and mailing, registration and advertising costs. which is the journal entry that better reflects the transaction?

Answer 1

The journal entry that better reflects the transaction is to debit Cash for $2,000, credit Miscellaneous Expenses for $200, and credit Common Stock for $1,800.

Step-by-step explanation:

The journal entry that better reflects the transaction can be recorded as follows:

Debit Cash ........................... $2,000

Credit Miscellaneous Expenses ........... $200

Credit Common Stock .................... $1,800

The company would debit the Cash account for the amount of $2,000 received from the issuance of shares. The company would then credit the Miscellaneous Expenses account for the amount of $200 paid for legal fees, accounting fees, underwriting commissions, and other related costs. Finally, the company would credit the Common Stock account for the remaining amount of $1,800, representing the par value of the shares issued.