Question

A corporation issued 7000 shares of its $10 par value common stock in exchange for land that has a market value of$82,000. The entry to record this transaction would include:_______

a) A credit to Land for $70,000.
b) A debit to Land for $7oooo.
c) A credit to common stock for $82,000.
d) A debit to Common Stock for $70,000.
e) A credit to Contributed Capital in Excess of Par value. Common Stock for $12,000.

Answer 1

Option e is the correct answer.

Step-by-step explanation:

The issuance of common stock in exchange of land would mean a debit to the asset account for land at the market value for the land which is $82000. The other side of the transaction would contain two accounts- a credit to the Common Stock account and a credit to the Paid in/Contributed Capital in excess of Par value, Common Stock.

The value of Common Stock will be = 7000 * 10 = 70000

The remaining of 82000 - 70000 = 12000 will be credited to the contributed capital in excess of par value account.

The entry to record this transaction will be,

Land 82000 Dr

Common Stock 70000 Cr

Contributed Capital in excess of par value-Common Stock 12000 Cr