Question

S. Lawyer performed legal services for E. Corp. Due to a cash shortage, an agreement was reached whereby E. Corp. would pay S. Lawyer a legal fee of approximately $15,000 by issuing 8,000 shares of its common stock (par $1). The stock trades on a daily basis and the market price of the stock on the day the debt was settled is $1.80 per share. Given this information, the best journal entry for E. Corp. to record for this transaction isa. Legal Expense 14,400Common Stock 14,400b. Legal Expense 15,000Common Stock 15,000c. Legal Expense 15,000Common Stock 8,000Paid-in Capital in Excess of Par - Common 7,000d. Legal Expense 14,400Common Stock 8,000Paid-in Capital in Excess of Par - Common 6,400

Answer 1

Answer:

legal fees             15,000 debit

     common stock                       8,000 credit

    paid-in in excess of par value 7,000 credit

Explanation:

the legal fee expense is for 15,000 so we will recognize the expense for that amount.

the stock have a face value of $1 but, the laywer agree to recieve up to 8,000 which means thre is an additoonal paid-in for  7,000 which is the deifference between the expense amount and the shares face value.

That will be recorded in the journal entry.