On June 1, 2019, 4,000 shares of $20 par value common stock are issued in exchange for new equipment. Comparable equipment sells for $116,000 cash. Other shares of this class of common stock originally sold for $13 per share in 2019.
The journal entry to record this exchange should debit the Equipment account for what amount?

Question

Quizplus · Accepted Answer

The Equipment account should be debited for $116,000, which is the fair market value of the equipment received in exchange for the shares. When assets are exchanged for stock, the asset (in this case, equipment) is recorded at its fair market value.

On June 1, 2019, 4,000 Shares of $20 Par Value