A corporation issued 6,400 shares of $10 par value common stock in exchange for some land with a market value of $98,000. The entry to record this exchange is:

To record the issuance of common stock in exchange for land, you need to consider two key points:

1. **Common Stock Account**: The common stock should be recorded at par value. In this case, the par value is $10, and the company issued 6,400 shares. Therefore, the amount recorded under the "Common Stock" account would be:
   \[
   6,400 \, \text{shares} \times 10 \, \text{dollars/share} = 64,000 \, \text{dollars}
   \]
   
2. **Additional Paid-In Capital**: Any amount received above the par value is credited to "Additional Paid-In Capital." In this case, the market value of the land is $98,000, and the common stock's par value is $64,000, so the excess amount of:
   \[
   98,000 \, \text{dollars} - 64,000 \, \text{dollars} = 34,000 \, \text{dollars}
   \]
   is recorded in the "Additional Paid-In Capital" account.

3. **Land Account**: The land is recorded at its market value, which is $98,000.

### Journal Entry:
\[
\text{Land} \quad 98,000 \quad \text{(Debit)}
\]
\[
\text{Common Stock} \quad 64,000 \quad \text{(Credit)}
\]
\[
\text{Additional Paid-In Capital} \quad 34,000 \quad \text{(Credit)}
\]

This entry ensures the land is recorded at market value, while the common stock is recorded at par value, with the excess going to additional paid-in capital.

Would you like more details or have any questions?

Here are 5 related questions for further exploration:

1. How would the entry differ if the shares had no par value?
2. What is the impact of such transactions on a corporation's balance sheet?
3. How is additional paid-in capital different from retained earnings?
4. What happens if the land's market value differs from the assessed value?
5. How would the entry change if only part of the shares were issued?

**Tip**: In stock-for-asset transactions, always record the asset at its fair market value, regardless of the stock’s par value.

Learn how to record the issuance of 6,400 shares of $10 par value stock in exchange for land valued at $98,000. This journal entry involves calculating common stock, additional paid-in capital, and the land asset. Suitable for undergraduate accounting students.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation