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    Talia59 Posts: 28, Reputation: 1
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    Aug 6, 2012, 02:05 PM
    When issuing common stock to pay a creditor how do you account for the journal record
    Weldon Engineering owes one of its creditors $20,000. To settle the debt, Weldon pays
    $5,000 cash and also issues common stock valued at $15,000 to the creditor.
    How would this repayment of the $20,000 debt be recorded in Weldon's books?
    A. Debit common stock $15,000; debit debt owed $5,000; credit cash $20,000
    B. Debit debt owed $20,000; credit cash $5,000; credit common stock $15,000
    C. Debit debt owed $5,000; credit cash $5,000
    D. Debit common stock $15,000; debit cash $5,000; credit debit owed $20,000

    **My answer: B because you I know that you first need to credit cash because it is a decrease in cash when you pay the creditor. Next you will need to credit common stock because you have issued common stock which is a credit on the t account. Then you must debit debt owed because that is an account payable so a debit in the account payable section would decrease what you owe. I'm not 100% here can someone please tell me if I'm correct?

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