A company sells 10,000 shares of previously authorized stock at the par value of $10 per share. What's the correct entry to record the transaction?

Step 1: Define the Problem

Identify the key components of the question that need to be addressed:

• The company is selling shares.
• The shares are sold at par value.
• The number of shares and the par value per share are given.

Step 2: Break Down the Problem

Divide the problem into smaller, manageable parts:

1. Determine the total value of the shares sold.
2. Identify the accounts affected by the transaction.

Step 3: Apply Relevant Concepts

Use appropriate accounting principles to solve each part of the problem:

• Total Value of Shares Sold: Multiply the number of shares by the par value per share.
• Journal Entry: Identify the accounts to debit and credit.

Step 4: Analysis, Verify and Summarize

• Total Value Calculation: $\text{Total Value} = 10,000 \, \text{shares} \times \$10/\text{share} = \$100,000$
• Journal Entry:
  • Debit: Cash account for $100,000 (increase in assets).
  • Credit: Common Stock account for $100,000 (increase in equity).

Final Answer

The correct entry to record the transaction is:

• Debit: Cash $100,000
• Credit: Common Stock $100,000