Question

A corporation issues 6,000 shares of $1 par value stock for a parcel of land valued at $12,000. Prepare the journal entry to reflect this transaction.

a) Debit Land $12,000; Credit Common Stock $6,000; Credit Paid-in Capital in Excess of Par $6,000
b) Debit Land $12,000; Credit Common Stock $12,000
c) Debit Common Stock $12,000; Credit Land $12,000
d) Debit Common Stock $6,000; Debit Paid-in Capital in Excess of Par $6,000; Credit Land $12,000

Answer 1

The correct journal entry for issuing 6,000 shares of $1 par value stock for land valued at $12,000 is to debit Land for $12,000, credit Common Stock for $6,000, and credit Paid-in Capital in Excess of Par for $6,000. The answer is option (a).

Step-by-step explanation:

When a corporation issues stock in exchange for non-cash assets such as land, the transaction must be recorded on the corporation's books.


To record the issuance of 6,000 shares of $1 par value stock for a parcel of land valued at $12,000, the correct journal entry is:

• Debit Land for $12,000
  
• Credit Common Stock for $6,000 (6,000 shares × $1 par value per share)
  
• Credit Paid-in Capital in Excess of Par for $6,000 (the difference between the land value and the par value of the stock issued)

Therefore, the complete journal entry to reflect the transaction is:

Debit Land $12,000;

Credit Common Stock $6,000;

Credit Paid-in Capital in Excess of Par $6,000

The correct answer choice is (a).