Question

The Fast Company purchases land for $12,000. The payment is made by issuing 1,200 shares of common stock of $10 each. The proper journal entry for this transaction would be:

a. Land $12,000; Common Stock $10,000; Cash $2,000
b. Land $12,000; Common Stock $12,000
c. Land $10,000; Common Stock $10,000; Cash $2,000
d. Common Stock $12,000; Land $12,000

Answer 1

The correct journal entry for The Fast Company's purchase of land through the issuance of common stock is 'Land $12,000; Common Stock $12,000.'

Step-by-step explanation:

The proper journal entry for the transaction where The Fast Company purchases land for $12,000 by issuing 1,200 shares of common stock of $10 each is:

b. Land $12,000; Common Stock $12,000

This entry reflects the exchange of the company's common stock for land. The land is recorded at its purchase price of $12,000, and the common stock is issued at its par value, which totals $12,000 (1,200 shares x $10 each). As a result, no cash is involved in this transaction.