Mustang Corporation issued 5,000 shares of $1 par value common stock in exchange for a some equipment with an asking price of $75,000.The stock was sold the day before at a price of $13 per share.The journal entry to record this exchange includes a:
A)credit to Paid-in-Capital in Excess of Par--Common Stock for $60,000
B)credit to Common Stock for $60,000
C)debit to equipment for $5,000
D)debit to equipment for $75,000

Question

Quizplus · Accepted Answer

The equipment is valued at the market value of the stock, which is $13 per share. Therefore, the equipment is valued at $65,000 (5,000 shares x $13). The common stock is credited for $5,000 (5,000 shares x $1 par value), and the excess is credited to Paid-in-Capital in Excess of Par--Common Stock for $60,000 ($65,000 - $5,000).

Mustang Corporation Issued 5,000 Shares of $1 Par Value Common