Question

Knowledge Check 05 On January 15, Pinkney, Inc., issued 10,000 shares of $10 par value common stock in exchange for land and a building. Five years ago, the stockholder purchased the land for $40,000 and constructed the building at a cost of $90,000. At the time of the stock issuance, the land and the building had fair market values of $45,000 and $95,000, respectively. Complete the necessary journal entry by selecting the account names and dollar amounts from the drop-down menus.

Answer 1

Answer-

Date	Title	Dr.	Cr.
15-Jan	Land	45,000
	Building	95,000
	Common Stock,$10 Par value		100,000
	Paid in capital excess of Par Value, Common Stock		40,000

A company needs to record the transaction at the market value on the date of a transaction.The market value of Land & Building is (45,000+95,000=140,000) and the stock has been issued at a price of (140,0000/10,000) @14 per share par value of the share is $10 and excess value is for premium @$4.