Question

Sudoku Company issues 27,000 shares of $8 par value common stock in exchange for land and a building. The land is valued at $233,000 and the building at $371,000.

Prepare the journal entry to record issuance of the stock in exchange for the land and building.

Answer 1

Debit land with $233,000

Debit building with $371,000

Credit common stock with $216,000

Credit premium on common stock with $388,000

Step-by-step explanation:

Value of share = 27,000 × $8 = 216,000

Total value of a land and a building = $233,000 + $371,000 = $604,000

Share premium = $604,000 - 216,000 = $388,000

The journal entries will be as follows:

Details Dr ($) Cr ($)

Land 233,000

Building 371,000

Common stock 216,000

Premium on common stock 388,000

Being the issue of common stock at a premium in exchange for a land and a building

Answer 2

Journal entry

Particulars Dr ($) Cr ($)

Land 233,000

Building 371,000

Common stock 216,000

Premium on common stock 388,000

First, we need to compute the value of share.

Value of share

= 27,000 × $8

= $216,000

We will as get the total value of land and building.

Total value of a land and a building

= $233,000 + $371,000

= $604,000

Share premium

= $604,000 - 216,000

= $388,000

Hence, journal entry to record issuance of the stock in exchange for the land and building would be;

Particulars Dr ($) Cr ($)

Land 233,000

Building 371,000

Common stock 216,000

Premium on common stock 388,000

(Being the issuance of common stock at a premium in exchange for land and building)