Question

Macko Inc. received equipment valued at $40,000 and a building valued at $200,000 in exchange for 4,500 shares of $32par value common stock and $50,000 cash. The entry to record this transaction would include:_______

a. Credit to Additional Paid in Capital for $ 190,000
b. Credit to Common Stock for $190,000
c. Credit to Additional Paid in Capital for $ 45,000
d. Credit to Retained Earnings for $46,000

Answer 1

c. Credit to Additional Paid in Capital for $ 45,000

Step-by-step explanation:

The exchange would increase the asset balances : Equipment by $40,000 and Buildings by $200,000. This makes the Debit side of this transaction to add up to $240,000. On the credit side, Common Stock Increases by $144,000 ( 4,500 shares × $32) and Cash decreases by $50,000. For the credit to reach the $240,000 balancing figure, we would need to account for the Additional Paid in Capital for $ 45,000 that is created out of shares issued in excess of par.