B is corrent. Additional paid-in capital should be recorded when the common stock is contracted for or subscribed. Also, a receivable is recorded, and a new equity account, common stock subscribed, is established. The journal entry is as follows:
| Cash | (cash received) | |
| Subscription receivable | (balance due) | |
| | (par value of shares
issued) |
| | Additional paid-in
capital |
| | (amount in excess of par) |
A is incorrect. Additional paid-in capital should be recorded when the common stock is contracted for or subscribed. Also, a receivable is recorded, and a new equity account, common stock subscribed, is established. The journal entry is as follows:
| Cash | (cash received) | |
| Subscription receivable | (balance due) | |
| | (par value of shares
issued) |
| | Additional paid-in
capital |
| | (amount in excess of par) |
C is incorrect. Additional paid-in capital should be recorded when the common stock is contracted for or subscribed. Also, a receivable is recorded, and a new equity account, common stock subscribed, is established. The journal entry is as follows:
| Cash | (cash received) | |
| Subscription receivable | (balance due) | |
| | (par value of shares
issued) |
| | Additional paid-in
capital |
| | (amount in excess of par) |
D is incorrect. Additional paid-in capital should be recorded when the common stock is contracted for or subscribed. Also, a receivable is recorded, and a new equity account, common stock subscribed, is established. The journal entry is as follows:
| Cash | (cash received) | |
| Subscription receivable | (balance due) | |
| | (par value of shares
issued) |
| | Additional paid-in
capital |
| | (amount in excess of par) |
