9RQ - Horngren'S Financial And Managerial Accounting

Question

If stock is issued for assets other than cash describe the recording of this transaction

Step-by-Step Solution

Answer

The stocks issued for assets other than cash are recorded at the market value of the assets exchanged or the market value of the corporate stock.

Step 1: Introduction to the topic

A stock, also known as equity, is a security that addresses the ownership of a portion of a corporation. Corporations issue stock to raise funds to operate their corporate. 

There are two main types of stock, namely; common stock and preferred stock.

Step 2: Recording of the transactions

The transaction is recorded at the market value of the assets received or the market value of the stock issued, whichever is more appropriately determinable. Instead of a Cash account, an Asset account will be debited, and common stock will be credited.