Question

Burke Corporation issued 10,000 shares of its no-par common stock in exchange for land with an independently appraised value of $100,000. Burke’s common shares are not publicly traded. Burke’s accountant suggests that the fair value of each share of stock is approximately $15. Prepare the appropriate journal entry for this exchange transaction.

Answer 1

Answer:

Debit Land with $100,000, debit Discount on issue of share $50,00; Credit Common stock with $150,000.

Explanation:

Share value = 10,000 * $15 = $150,000

The journal entry will be as follows:

Details                                              Dr ($)              Cr ($)                        

Land                                              100,000

Discount on issue of share              50,00

Common stock                                                       150,000

To record issue of common stock at a discount in exchange for land   _