Answer:
Cash (Dr.) $85,000,000
Share Capital (Cr.) $5,000,000
Share Premium (Cr.) $85,000,000
Explanation:
The par value is simply the face value that appears on the certificate of share deposited with the depository system. When multiplied with the number of shares issued, it gives us Share Capital which in this case is $5,000,000 (5 * 1,000,000). But Olsson Corporation issued these shares at $85,000,000, this excess amount of $80,000,000 (85,000,000 - 5,000,000) is Share Premium. The appropriate entry to record the issue is:
Cash (Dr.) $85,000,000
Share Capital (Cr.) $5,000,000
Share Premium (Cr.) $85,000,000
