An investor and company agree to exchange non-cash assets for common stock. The

Question

An investor and company agree to exchange non-cash assets for common stock. The investor will give the company land and a building in exchange for 10,000 common shares. The land has a book value (for the investor) of $300,000 and a fair market value of $500,000. The building has a book value of $200,000 and a fair market value of $250,000. The company's common stock is currently selling on the market at $80/share with a $1 par value. What is the appropriate journal entry?

A) Dr. Land 500,000 Dr. Building 250,000 Cr. Common Stock 10,000 Cr. Additional Paid-In Capital 740,000

B) Dr. Land 533,333 Dr. Building 266,667 Cr. Common Stock 10,000 Cr. Additional Paid-In Capital 790,000

C) Dr. Land 300,000 Dr. Building 200,000 Cr. Common Stock 10,000 Cr. Additional Paid-In Capital 490,000

D) Dr. Land 500,000 Dr. Building 250,000 Cr. Common Stock 10,000 Cr. Additional Paid-In Capital 790,000

Explanation / Answer

D) Dr. Land 500,000 Dr. Building 250,000 Cr. Common Stock 10,000 Cr. Additional Paid-In Capital 790,000

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