Question

Q 11.40: Woolley Cloth Distributors issued 25,000 shares of $10 stated value no par stock in exchange for land with an advertised price of $318,000. The stock is currently trading for $12 per share. Journalize the entry to recognize the exchange.

Answer 1

The entry to recognize the exchange :

Land $318,000 (debit)

Common Stock $300,000 (credit)

Accounts Payable $300,000 (credit)

Step-by-step explanation:

The Price of stock is equivalent to the issue price at the date of the transaction of $12.

Note that the Common Stocks do not have par value, this means there is no share premium reserve on the stocks that needs to be recognized.

Since the Price of land is above the price of common stocks, the remainder is the amount owing, a liability.