Quality Corporation has 500,000 shares of $1 par value common stock authorized and 200,000 shares issued and outstanding.Land worth $100,000 received in exchange for 10,000 shares of common stock of the corporation would do all the following except:
A)increase the number of shares of common stock issued and outstanding to 210,000 shares
B)increase the total in the common stock account by $10,000
C)increase paid in capital in excess of par by $90,000
D)increase Retained Earnings by $100,000

Question

Quizplus · Accepted Answer

The transaction involves the issuance of common stock in exchange for land, therefore, there would be no impact on retained earnings. Option A is incorrect because the new shares would be added to the existing shares, resulting in a total of 210,000 issued and outstanding shares. Option B is correct because the par value of the shares issued is $10,000 (10,000 x $1), which would be recorded in the common stock account. Option C is correct because the difference between the market value of the land ($100,000) and the par value of the shares issued ($10,000) is $90,000, which would be recorded as paid-in capital in excess of par.

Quality Corporation Has 500,000 Shares of $1 Par Value Common