Samuel Sorenson,the sole stockholder,contributed $70,000 in cash and land worth $130,000 in exchange for common stock to open a new business,SS Consulting.Which of the following general journal entries will SS Consulting make to record this transaction?
A)Debit Assets $200,000; credit Common Stock,$200,000.
B)Debit Cash and Land,$200,000; credit Common Stock,$200,000.
C)Debit Cash $70,000; debit Land $130,000; credit Common Stock,$200,000.
D)Debit Common Stock,$200,000; credit Cash $70,000,credit Land,$130,000.
E)Debit Common Stock,$200,000; credit Assets,$200,000.

Question

Quizplus · Accepted Answer

The proper way to record this transaction is to debit cash for the amount contributed in cash ($70,000), debit land for the fair market value of the land ($130,000), and credit common stock for the total contributed amount ($200,000). Option A is incorrect because it only credits common stock and does not record the land. Option B is incorrect because it only has one credit account and does not separate the contributions. Option D is incorrect because it debits common stock, which is not an account that is typically debited. Option E is incorrect because it credits assets, which is too broad of an account and does not specify the exact assets being recorded.

Samuel Sorenson,the Sole Stockholder,contributed $70,000 in Cash and Land Worth