Sunrise Online issued 500 shares of its $10 common stock in exchange for equipment with a fair market value of $7,500.The entry to record the transaction would include a:

Question

Quizplus · Accepted Answer

The fair market value of the equipment received is $7,500, but only 500 shares were issued, with a par value of $10 per share. Therefore, the total par value of the shares issued is only $5,000 (500 shares x $10 per share = $5,000). This means that the remaining value of the equipment received (i.e. $7,500 - $5,000 = $2,500) is considered as "Paid-in Capital in Excess of Par Value". Therefore, the entry to record the transaction would include a credit to "Paid-in Capital in Excess of Par Value" for $2,500.

Sunrise Online Issued 500 Shares of Its $10 Common Stock