Five hundred shares of $25 par common stock was exchanged for a piece of equipment with a fair market value of $13,500.The journal entry to record the transaction would include a credit to:

Question

Quizplus · Accepted Answer

The par value of the stock is $25, so 500 shares have a par value of $12,500 (500 x $25). The equipment is valued at $13,500, which is $1,000 more than the par value of the stock. Therefore, the excess amount of $1,000 is credited to Paid-In Capital in Excess of Par-Common.

Five Hundred Shares of $25 Par Common Stock Was Exchanged