On December 2,2015,Ewell Inc.purchases a piece of land from the original owner.In payment for the land,Ewell Inc.issues 8,000 shares of common stock with $1.00 par value.The land has been appraised at a market value of $400,000.Which of the following is included in the journal entry to record this transaction?

Question

Quizplus · Accepted Answer

The journal entry to record the transaction of purchasing land for common stock is to credit the Common Stock account for the par value of the stock issued and credit the remaining amount to the Additional Paid-In Capital or Paid-In Capital in Excess of Par-Common account. In this case, Ewell Inc. issued 8,000 shares of stock with a par value of $1.00, for a total of $8,000 credited to the Common Stock account. The land has a market value of $400,000, which means that the excess amount above par ($392,000) needs to be credited to the Paid-In Capital in Excess of Par-Common account. Thus, the correct journal entry is to credit Common Stock-$1 Par Value for $8,000 and credit Paid-In Capital in Excess of Par-Common $392,000.