This is from Intermediate Accounting 2 by authors: Spiceland, Nelson, and Thomas. Ch. 18 P-1.

The only part you need to disregard is Part A.

Dec. 1 dr. cash $26

cr. common stock $1

cr. gain on previously issued shares $25

The books corrected answer:

Pertaining to Part be Journal entry dated Dec. 1; Since common stock is $1 par and $20 per share, wouldn't Paid-In-Capital-excess of par be credited $19, c/s credited by $1, and a gain of $6 be credited as well to balance out the cash debit of $26? Why do they have it the way they do?

Part A During its first year of operations, the McCollum Corporation entered into the following transactions relating to shareholders' equity. The corporation was authorized to issue 100 million common shares, $1 par per share. Required: Prepare the appropriate journal entries to record each transaction. Jan. 9 Mar. 11 Issued 40 million common shares for $20 per share. Issued 5.000 shares in exchange for custom-made equipment. McCollum's shares have traded recently on the stock exchange at $20 per share. Part B A new staff accountant for the McCollum Corporation recorded the following journal entries during the second year of operations. McCollum retires shares that it reacquires (restores their status to that of authorized but unissued shares). ($ in millions) Jan. 12 Sept. 1 Land.. Paid-in capital-donation of land................... Common stock Retained earnings... . Cash .. ..................... Cash ....... Common stock............... Gain on sale of previously issued shares..... Dec. 1 Required: Prepare the journal entries that should have been recorded for each of the transactions. General Journal Debit Ref. (million) $26 Credit (million) Date Account Titles and Explanation Cash Common stock Paid in capital-excess of par (To record common stock issued) Explanation: Comment Step 6 of 6 A Cash is an asset and its balance increases, so it is debited. Common stock is equity and its balance increases, so it is credited. Paid in capital in excess of par is a liability and its balance increases, so it is credited