Question

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 from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Answer 1

Answer:Pinkney Journal $

Date

January 15

Land $ Building. Dr 100,000

Share capital. Cr. 100,000

Narration. Transfer of share for the purchase of land and building.

Explanation:

The firm will record the value of the land and building at the price of shares it has transferred for the purchase not withstanding the price of it's purchase by the seller nor the market fair value on purchase.

The payment of the price of the land & building with shares does not represents a new issue of shares but it's a transfer of share ownership from the firm to the seller and this will be reflected in the share register.