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Issuing No Par Value Stock quiz

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  • What account do all proceeds from issuing no par value common stock go into?
    All proceeds are recorded directly into the common stock account.
  • When issuing no par value stock, do you use the Additional Paid-In Capital (APIC) account?
    No, the APIC account is not used when issuing no par value stock.
  • If a company issues 500,000 shares of no par value stock for \$250,000, how is the cash received recorded?
    The \$250,000 cash received is credited entirely to the common stock account.
  • How do you calculate the total cash received if given a per share price for no par value stock?
    Multiply the number of shares issued by the per share price to get the total cash received.
  • What happens to the equity section of the balance sheet when no par value stock is issued?
    The common stock account increases by the total cash received from the issuance.
  • If no par value is stated for common stock, what should you assume?
    You should assume the stock has no par value and record all proceeds in the common stock account.
  • Why is the journal entry for issuing no par value stock considered simpler?
    Because there is no need to split proceeds between common stock and APIC accounts.
  • What is the journal entry for issuing 500,000 shares of no par value stock at \$2 per share?
    Debit cash for \$1,000,000 and credit common stock for \$1,000,000.
  • What does APIC stand for and when is it used?
    APIC stands for Additional Paid-In Capital and is used only when there is a par value.
  • If a problem does not mention par value, how should you record the issuance of common stock?
    Record all proceeds in the common stock account, assuming no par value.
  • How does issuing no par value stock affect assets and equity?
    Both assets (cash) and equity (common stock) increase by the amount received.
  • What is the main difference in accounting for par value versus no par value stock?
    Par value stock requires splitting proceeds between common stock and APIC, while no par value stock does not.
  • Why might companies issue no par value stock?
    It simplifies accounting entries and avoids the need to track par value and APIC.
  • What is credited when a company receives cash for issuing no par value common stock?
    The common stock account is credited for the total cash received.
  • What should you do if a problem gives only the total selling price for no par value stock?
    Credit the common stock account for the total selling price received.