Q5SE - Horngren'S Financial And Managerial Accounting

Question

Journalizing issuance of stock for assets other than cash

Cedar Corporation issued 36,000 shares of \(1 par value common stock in exchange for a building with a market value of \)160,000. Record the stock issuance.

Step-by-Step Solution

Answer

Building will be debited with $160,000; Common stock- $1 par value will be credited with $36,000 and Paid-in capital in excess of par will be credited with $124,000.

Step 1: Basic Introduction-

Value of building: $160,000

 $\begin{array}{rcl}\mathbf{CommonStock}& \mathbf{=}& \mathbf{NumberofShares}\mathbf{\times }\mathbf{ParValuePerShare}\\ & \mathbf{=}& \mathbf{36}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{\$}\mathbf{1}\\ & \mathbf{=}& \mathbf{\$}\mathbf{36}\mathbf{,}\mathbf{000}\\ & & \end{array}$

Step 2: Journal entry of issuance of common stock

 

Date	Transaction	Debit	Credit
	Building	$160,000
	Common stock- $1 par value		$36,000
	Paid-in capital in excess of par		$124,000