Exercise 11-7A Issuing stock for assets other than cash LO 11-2 Tom Yuppy, a wea
ID: 2392777 • Letter: E
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Exercise 11-7A Issuing stock for assets other than cash LO 11-2 Tom Yuppy, a wealthy investor, exchanged a plot of land that originally cost him $28,080 for 1,040 shares of $10 par common stock issued to him by Leuig Corp. On the same date, Leuig Corp. issued an additional 2,080 shares of stock to Yuppy for $27 per share Required a. What was the value of the land at the date of the stock issue? lue of the land b. Show the effect of the two stock issues on Leuig's books in a horizontal statements model. In the Caslh Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element was not affected by the event. Balance Sheet Income Statement Assets Stockholders' Equity Revenue - Expense Net ncome Cash Flow Stock + PIC?n Excess Event Cash Common+ 1 - Exchange of land for shares 2 - Issue of additional sharesExplanation / Answer
a. The value of land on the date of stock issue = 1040 shares * 27 per share (fair value) = 28,080
b.
Land Increase by 28,080
Common stock increase by 10,400
PIC in excess increases by 17,680
In Cash Flow, there is no effect as no flow of cash has taken place.
Cash Increases by 56,160
Common Stock increases by 20,800
PIC in excess increases by 35,360
In cash flow statement, Cash Flow from financing activity increases by 56,160.
c.
Journal:
Land A/c Dr 28,080
To Common Stock A/c 10,400
To PIC in excess 17,680
(Being exchange of land with common stock recorded)
Cash A/c Dr 56,160
To Common Stock A/c 20,800
To PIC in excess 35,360
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