Question

Knowledge Check 05 On January 15, Pinkney, Inc., issued 10,000 shares of $10 par value common stock in exchange for land and a building. Five years ago, the stockholder purchased the land for $40,000 and constructed the building at a cost of $90,000. At the time of the stock issuance, the land and the building had fair market values of $45,000 and $95,000, respectively. Complete the necessary journal entry by selecting the account names and dollar amounts from the drop-down menus.

Answer 1

Answer:

land      45,000 debit

building 95,000 debit

    common stock         100,000 credit

    additional paid-in       40,000 credit

--issuance of shares in exchange of land an the building on it--

Explanation:

common stock face value:

10,000 shares x $10 = $100,000

fair value of the acquired assets:

land       45,000

building 95,000

total      140,000

Additional paid-in calculation

        140,000 recieved for the shares

     - 100,000

          40,000 additional paid-in

We consider the face value as the incurred cos t five years ago are not relevant today. The land and building are appraised at their market value