What is the correct journal entry to record the issuance of shares when a company issues 300,000 new shares for $5,000,000?

When a company issues new shares, the transaction is recorded in the equity section of the balance sheet. In this case, the company issues 300,000 shares for a total of $5,000,000. To understand the appropriate journal entry, consider the components involved: the par value of the stock and the amount received in excess of par value from the issuance.

Assuming that the par value of the stock is $1 per share, the total par value of the shares issued would be 300,000 shares multiplied by $1, which equals $300,000. This amount represents the nominal value of the shares that is recorded in the common stock account.

The excess amount that the company receives over the par value is calculated by taking the total cash received ($5,000,000) and subtracting the par value ($300,000). This gives us an excess of $4,700,000 that is recorded in the paid-in capital in excess of par account.

Thus, the correct journal entry would involve a credit to common stock for the par value amount of $300,000 and a credit to paid-in capital in excess of par for the remaining $4,700,000. Recognizing this correctly ensures that the company's equity