Question

A corporation issued 5,900 shares of $10 par value common stock in exchange for some land with a market value of $88,000. The entry to record this exchange is:
a. Debit Land $88,000; credit Common Stock $88,000.
b. Debit Land $59,000; credit Common Stock $59,000.
c. Debit Common Stock $59,000; debit Paid-In Capital in Excess of Par Value, Common Stock $29,000; credit Land $88,000.
d. Debit Land $88,000; credit Common Stock $59,000; credit Paid-In Capital in Excess of Par Value, Common Stock $29,000.
e. Debit Common Stock $88,000; credit Land $88,000.

Answer 1

Answer:

The correct answer is option (d)Debit Land $88,000; credit Common Stock $59,000; credit Paid-In Capital in Excess of Par Value, Common Stock $29,000.

Explanation:

Solution

Given that:

Since the fair value of the Land is more readily known,

Then,

The Fair Market value of Land $88,000 will be taken as basis for valuation.

So entry will be :

Land Dr $88,000

Common Stock Cr $ 59,000

Paid in Capital in Excess of Par -Common Stock Cr 29,000

So a option is correct