Question

Smith Company exchanges assets to acquire a building. The market price of the Smith stock on the exchange date was $35 per share and the building's book value on the books of the seller was $250,000. Which of the following journal entries is correct for Smith Company when Smith issues 10,000 shares of $10 par value common stock and pays $20,000 cash in exchange for the building?

A) The common stock account increases by $100,000.
B) The building account increases by $370,000.
C) Stockholders' equity increases $350,000.
D) The additional paid-in capital account increases by $100,000.

Answer 1

B) The building account increases by $370,000.

Step-by-step explanation:

Since the per share value is $35

Also the 10,000 shares are issued at $10 and pays $20,000 in exchange of building

So the building account would be increased by

= 10,000 shares × $35 + $20,000

= $350,000 + $20,000

= $370,000

hence, the correct option is B.