On Dec.1,2006, shares of authorized common stock were issued on a subscription basis at a price in excess of par value. A total of 20% of the subscription price of each share was collected as a down payment on Dec. 1,2006 and the remaining 80% would be collected in 2007. Collectability was reasonably assured. At dec.31,2006 the stockholders equity would report APIC for the excess of subscription price over par value and

a.)Common stock issued for 20% of the par value of the shares of common stock subscribed

b.) Common stock issued for the par value of the shares of the common stock subscribed.

c.) Common stock subscribed for 80% of the par value of the shares of common stock subscribed.

d.) Common stock subscribed for the par value of the shares of common stock subscribed.

Correct answer is d.)

I feel a.) is more appropriate. In my understanding the journal entry must be as follows(assuming par value 100 and issue price 150)

Dr.Cash(20% of 150) 30

Dr.Stock subscripiton receivable 120

Cr.Common stock (20%*100) 20

Cr.Common stock subscribed (80%*100) 80

Cr.APIC 50

Is my understanding wrong? Please share your inputs.

I can't help you with the answer as I can't get past the language, but I'll give you the J/E I would have made for this:

Correct, Jams !

It is to be remembered that we have only received 20% of the subscription price of each share , that is, only partial payment.

So, any proceeds would go to common stock subscribed, not common stock.

Once the whole share value is received, the common stock would be credited....

I hope I haven't confused !

Yeah . I do agree that shares can be issued only upon full subscription.common shares subscribed account has to be reduced by subscription receivable a/c, right. Then how is the shareholders equity account increased by the common shares subscribed?

Please share your thoughts.