Company charter authorizes 1,000,000 shares of common stock. They purchased a piece of land and in payment fo the land, issues 400,000 shares of common stock with a $1.00 par value. The land has been appraised at a market value of $1,480,000. Journalize the entry

Company charter authorizes 1,000,000 shares of common stock. They purchased a piece of land and in payment fo the land, issues 400,000 shares of common stock with a $1.00 par value. The land has been appraised at a market value of $1,480,000. Journalize the entry

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter15: Contributed Capital

Section: Chapter Questions

Problem 1MC

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Concept explainers

Stockholder's Equity

The stockholders’ equity (often referred to as the book value of the company) is the number of assets available to the stockholder after its entire liabilities is paid off. The stockholders’ equity is also sometimes referred to as owner's equity. The stockholders’ equity or book value generally includes common stock, treasury stock retained earnings. It is an indicator of a company's financial strength and is an important item on the company's balance sheet.

Question

Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.

Expert Solution

Working:

Total par value of common stock = No. of common stock x Par value per share

= 400,000 shares x $1

= $400,000

Paid in capital in excess of par = Market value of Land - Total par value of common stock

= $1,480,000 - $400,000

= $1,080,000

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