A corporation issued 5,000 shares of its $1 par value common stock in exchange for land (market value $30,000)and a building (market value of $100,000).The entry to record this transaction would be:
A)Debit Land and Building,$130,000; Credit Common Stock,$5,000; Credit Paid-in Capital in Excess of Par Value,Common Stock,$125,000.
B)Debit Land,$30,000; Debit Building,$100,000; Credit Common Stock,$130,000.
C)Debit Land and Building,$5,000; Credit Common Stock,$5,000.
D)Debit Land,$30,000; Debit Building,$100,000; Credit Common Stock,$5,000; Credit Paid-in Capital in Excess of Par Value,Common Stock,$125,000.
E)Debit Building,$130,000; Credit Common Stock,$130,000.

Question

Quizplus · Accepted Answer

The corporation issued 5,000 shares of its $1 par value common stock in exchange for land and building with a market value of $130,000 ($30,000 + $100,000). Therefore, Land and Building should be debited for $130,000. The Common Stock account should be credited for the par value of the shares issued which is $5,000 (5,000 shares x $1 par value). The difference between the fair value of the land and building ($130,000) and the par value of the shares issued ($5,000) should be recorded as Paid-in Capital in Excess of Par Value, Common Stock for $125,000. So, the entry will be Debit Land, $30,000; Debit Building, $100,000; Credit Common Stock, $5,000; Credit Paid-In Capital in Excess of Par Value, Common Stock, $125,000.

A Corporation Issued 5,000 Shares of Its $1 Par Value