Which of the Following Journal Entries Is Correct When a Business

question 97

Multiple Choice

Which of the following journal entries is correct when a business entity issues common stock, above par value, to stockholders in exchange for cash? A. Cash
$\quad$ Common stock
$\quad$ Retained Earnings
B. Cash
$\quad$ Common stock
$\quad$ Additional paid-in capital
C. Cash
$\quad$ Investments
D. Common stock
$\quad$ Cash

• A) Option A
• B) Option B
• C)Option C
• D)Option D

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Definitions:

Sole Proprietor

A business owned and managed by one individual where there is no legal distinction between the owner and the business entity.

Creditor

An individual or entity to whom money or its equivalent is owed by another individual or entity, known as the debtor.

Professional Corporation

Identical to a business corporation in most respects. A professional corporation is formed by filing with the secretary of state, and it is managed by a board of directors, unless a statute permits it to be managed like a partnership. The rigid management structure makes the professional corporation inappropriate for some smaller professional practices.

Personal Liability

Legal responsibility of an individual to settle debts or legal judgments from their assets, not protected by business structures or limited liability.