Recording Stock Issuance Transactions Tutorial

What accounts are credited when a company issues 6500 shares of $10 par value common stock at $12 per share?

The correct answer is: Common Stock $65000 and Paid-in Capital in Excess of Par Value $13000.

When a company issues stock they have to record the transaction at the stock's par value or book value. In this case the par value was $10 per stock, so the total Common Stock account should increase by $65,000. Any amount of money paid in excess of par value must be recorded in another account, the Paid-in Capital in Excess of Par Value account. The extra $13,000 should be recorded in this account.