Question

a corporation acquires land valued at $95,000 and a building valued at $102,500 by issuing 5,000 shares of $20 par value common stock and $50,000 cash. Which of the following would be included in the entry to record this transaction?

a.paid in capital in excess of par common would be credited for $157,500

b. paid in capital in excess of par common would be credited for $47,500

c. common stock would be credited for $197,500

d. retained earnings would be credited for $37,500

Answer 1

Cost of land = $95,000

Cost of building = $102,500

Number of common shares issued = 5,000

Par value of 1 common share = $20

Cash paid = $50,000

Common stock will be credited by = Number of common shares issued x Par value of 1 common share

= 5,000 x 20

= $100,000

Cash will be credited by = $50,000

Total cost of land and building = Cost of land + Cost of building

= 95,000+102,500

= $197,500

Paid in capital in excess of par - common will be credited by = Total cost of land and building - Common stock will be credited - Cash will be credited

= 197,500-100,000-50,000

= $47,500

Correct option is b.

Paid in capital in excess of par common would be credited for $47,500

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