what is the journal entry if a owner of a company deposited $15,000 in their checking account. In return they received 1000 shares of common stock in their corporation. The par value of the common stock is $1 per share?
To determine the journal entry for the given transaction, we need to understand the accounting equation: Assets = Liabilities + Owner's Equity.
In this case, the owner invested $15,000 into the company's checking account, and in return, received 1000 shares of common stock with a par value of $1 per share.
1. First, let's record the increase in the company's assets (cash in the checking account):
Debit: Cash (checking account) $15,000
Credit: No entry because nothing decreased
2. Next, we need to record the increase in the company's owner's equity, specifically the capital stock account:
Debit: No entry because nothing decreased
Credit: Capital Stock $1,000 (par value of common stock)
So, the journal entry for this transaction would be:
Debit: Cash (Checking account) $15,000
Credit: Capital Stock $1,000
This entry reflects an increase in the company's cash and an increase in the owner's equity through the issuance of common stock. The balance in the capital stock account would now reflect the par value of the common stock issued.