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Chapter 15: Question 5BE (page 811)

On February 1, 2017, Buffalo Corporation issued 3,000 shares of its \(5 par value common stock for land worth \)31,000. Prepare the February 1, 2017, journal entry.

Short Answer

Expert verified

Land should be debited by $31,000,and the common stock and paid-in capital should be credited by $15,000and $16,000,respectively.

Step by step solution

01

Meaning of Stock Issuance

The term stock issuance helps corporations raise funds to meet the business's financial need. A company usually does this to provide ownership in the company in exchange for finance

02

Preparing journal entries of buffalo corporation

Date

Particular

Folio

Debit USD

$

Credit USD

$

01-02-2017

Land A/c Dr.

31,000

To common stock A/c (3,000$5) Cr.

15,000

To paid-in capital in excess Cr.

Of par common stock A/c

16,000

(being share issued for land)

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Most popular questions from this chapter

Joe Dumars Company has outstanding 40,000 shares of \(5 par common stock, which had been issued at \)30 per share. Joe Dumars then entered into the following transactions.

  1. Purchased 5,000 treasury shares at \(45 per share.
  2. Resold 2,000 of the treasury shares at \)49 per share.
  3. Resold 500 of the treasury shares at $40 per share.

Instructions

Use the following code to indicate the effect each of the three transactions has on the financial statement categories listed in the table below, assuming Joe Dumars Company uses the cost method (I = Increase; D = Decrease; NE = No effect).

#

Asset

Liabilities

Stockholders’ Equity

Paid-in Capital

Retained

Earnings

Net Income

1

2

3

What factors influence the dividend policy of a company?

Twenty-five thousand shares reacquired by Elixir Corporation for \(53 per share were exchanged for undeveloped land that has an appraised value of \)1,700,000. At the time of the exchange, the common stock was trading at $62 per share on an organized exchange.

Instructions

a) Prepare the journal entry to record the acquisition of land assuming that the purchase of the stock was originally recorded using the cost method.

b) Briefly identify the possible alternatives (including those that are totally unacceptable) for quantifying the cost of the land and briefly support your choice.

(Stock Dividends and Splits) The directors of Merchant Corporation are considering the issuance of a stock dividend. They have asked you to discuss the proposed action by answering the following questions.

Instructions

  1. What is a stock dividend? How is a stock dividend distinguished from a stock split (1) from a legal standpoint and (2) from an accounting standpoint?
  2. For what reasons does a corporation usually declare a stock dividend? A stock split?
  3. Discuss the amount, if any, of retained earnings to be capitalized in connection with a stock dividend

Explain the difference between the proportional method and the incremental method of allocating the proceeds of lump-sum sales of capital stock.
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