The correct answer is B) Credit to Common Stock $10,000. This journal entry will also include a Debit to Cash for $10,000.
When Knorr issues 1,000 shares of $2 par value common stock for $10 per share, the journal entry should be recorded as follows:
Debit: Cash $10,000
Credit: Common Stock $10,000
The Common Stock account is credited for the full amount of the proceeds received from the sale of the common stock ($10,000). The additional $8,000 over and above the par value of the common stock ($2,000) is recorded in the Additional Paid-In Capital account. No entry is made to the Retained Earnings account.
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