Question

On December 2, 2018, Eshares, Inc. purchases land. In payment for the land, Eshares, Inc. issues6000 shares of common stock with $6 par value. The land has been appraised at a market value of$430,000. Which of the following is included in the journal entry to record this transaction?A) debit Cash $430,000B) credit Common Stock$6 Par Value for $430,000C) credit Common Stock$6 Par Value for $36,000 and credit Paid-In Capital in Excess of ParCommon $394,000D) debit Common Stock$6 Par Value for $36,000 and debit Paid-In Capital in Excess of ParCommon $394,000

Answer 1

Answer:

C) credit Common Stock$6 Par Value for $36,000 and credit Paid-In Capital in Excess of ParCommon $394,000

Explanation:

The accounting should record teh land at their cost. which is 430,000

Because is an asset, it increase form debit. It will be debited.

Then, the common stok will be recorded at par. 6,000 shares at $6 per share = total common stock 36,000

Finally, the difference will be an additional in excess of par as the company do not issued more shares or pay the land with another assets or any financing.

journal entry:

land                                 430,000 debit

 common stock                                         36,000 credit

  Paid-In Capital in Excess of Par           294,000 credit

to record puchase of land through issues of shares

A) there is no cash involve. INCORRECT

B) the common stock will be at par 6,000 x 6 = 36,000 not 430,000. INCORRECT

d) common stock and paid-in capital are equity account. The company is issuing shares, so the equity icnreases. It should be credited.