Richard Redden contributed $70,000 in cash and land worth $130,000 to open a new business, RR Consulting, Inc. Which of the following general journal entries will RR Consulting, Inc. make to record this transaction?
A)Debit Assets $200,000; credit Common Stock, $200,000.
B)Debit Cash and Land, $200,000; credit Common Stock, $200,000.
C)Debit Cash $70,000; debit Land $130,000; credit Common Stock, $200,000.
D)Debit Common Stock, $200,000; credit Cash $70,000, credit Land, $130,000.
E)Debit Common Stock, $200,000; credit Assets, $200,000.

Question

Quizplus · Accepted Answer

The transaction involves the contribution of both cash and land, so these two assets must be separately identified in the journal entry. The Common Stock account is credited for the total amount of $200,000 because this represents the equity contributed by Richard Redden to the new business. Therefore, the journal entry should be: Debit Cash $70,000; Debit Land $130,000; Credit Common Stock $200,000. Option C is the only choice that reflects this entry.

Richard Redden Contributed $70,000 in Cash and Land Worth $130,000