Environmental Designs issues 3,000 shares of its $1 par value common stock at $20 per share. (1) Record the issuance of the stock. (2) Record the issuance of the stock assuming it is no-par value stock.

Assuming it is par value stock, the journal entries required would be:

Dr Cash                                               $60,000

Cr Common stock                                            $3,000

Cr Paid-in capital in excess of par                   $57,000

Assuming it is not a par value stock , the journal entries would be as follows:

Dr    Cash                            $60,000

Cr Common stock                              $60,000

Explanation:

In both instances, the cash realized from the issue is $60,000(3000*$20), which implies that cash has increased by $60000, hence the need to debit cash account in both cases.

In the first, the common stock account is credited with $3000(number of shares multiplied by par value per share) and the paid-in capital is credited with $57000($20-$1 *3000) to record the excess paid over the par value.

Lastly, the split of the price into par and premium amount does not apply in the second scenario.

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