The company issued 7,000 shares of stock in exchange for equipment that had a fair market value of $320,000. The entry to record transaction 2 would be:

Question

Quizplus · Accepted Answer

The entry to record the issuance of stock in exchange for equipment should credit Common Stock for the par value of the shares issued (7,000 x $10 = $70,000) and debit Equipment for the fair market value of the equipment received ($320,000). Since the fair market value of the equipment is higher than the par value of the stock issued, the remaining amount (320,000 - 70,000 = $250,000) should be recorded as Additional Paid-in Capital. Therefore, the correct entry is:
Cash 400,000
Common Stock 320,000
Additional Paid-in Capital 80,000

The Company Issued 7,000 Shares of Stock in Exchange for Equipment