A corporation was formed on January 1. The corporate charter authorized 100,000 $10 par value ordinary shares. During the first month of operation, the corporation issued 300 shares to its attorneys in payment of a $5,000 charge for helping the incorporation. The entry to record this transaction would include:

Question

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The issuance of shares in exchange for services rendered is considered a non-cash transaction. The corporation should record the transaction at the fair value of the shares issued, which is $5,000 (300 shares x $10 par value per share). Since the par value of the shares is less than the fair value, there is no share premium. The amount of $5,000 should be debited to Organization Expenses, which is a type of equity account that represents the cost of organizing the corporation.

A Corporation Was Formed on January 1