Answer:
The answer is A. Debit: Land, $1,200,000
Explanation:
The journal entry Lattern Company needs to record is:
Dr Land 1,200,000
Cr Common share 12,000
Cr Paid-in capital - Common share 1,188,000
As 120,000 shares is exchanged for the land and the share is traded in the exchange, the value of the land should be recorded at the market price of these 120,000 shares or 120,000 x 10 = $1,200,000.
Common share account is recorded at par value x number of shares issued = 0.1 x 120,000 = $12,000 while Paid-in capital-Common share account records the difference between market price and par value at the time of shares issuance or ( 10 - 0.1) x 120,000 = $1,188,000.
Thus, the correct answer is A. Debit: Land, $1,200,000
