Question

4) A corporation issued 6,000 shares of its $2 par value common stock in exchange for land that has a market value of $84,000. The entry to record this transaction would include: A) A debit to Common Stock for $12,000. B) A debit to Land for $12,000. C) A credit to Land for $12,000. D) A credit to Additional Paid-in Capital, Common Stock for $72,000. E) A credit to Common Stock for $84,000.

5) Refer to the fact pattern in question 4. Based on the transaction details, the market value of the corporation’s stock on the date of the stock issuance involving the exchange of land is: A) $2 per share. B) $12 per share. C) $14 per share. D) $16 per share. E) Not determinable based on above data.

6) A company's board of directors votes to declare a cash dividend of $.75 per share of common stock. The company has 15,000 shares authorized and 9,500 shares outstanding. The company had originally issued 10,000 shares to common shareholders but had repurchased 500 shares of common stock on the open market in the 6 months before the cash dividend declaration. The total amount of the cash dividend is: A) $10,250. B) $14,625. C) $7,125. D) $7,500. E) $11,250.

Answer 1

4. The Journal entry is shown below:-

Date	Particulars	Debit	Credit
	Land	$84,000
	To Common Stock (6,000 * $2)		$12,000
	To Paid-in capital in excess of par, common stock		$72,000
	(Being issue of common stock in exchange for the land is recorded)

Therefore the correct option is D) A credit to Additional Paid-in Capital, Common Stock for $72,000.

5. The exchange of land = Market value / Issued shares

= $84,000 / 6,000

= $14 per share

So, the correct option is C) $14 per share

6. The computation of the total amount of the cash dividend is shown below:-

Total amount of the cash dividend = Cash dividend per share * Outstanding shares

= $0.75 * 9,500

= $7,125

So, the correct option is  C) $7,125