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Issuing Stock. On October 15, 2015, Jake, a non-publicly traded company, issued 500,000 of its $0.10...

  1. Issuing Stock.
    1. On October 15, 2015, Jake, a non-publicly traded company, issued 500,000 of its $0.10 par value common stock in exchange for a building. As of October 15, 2015, Jake estimated one share of its company stock was worth $15. As of October 15, 2015, a consensus of real estate agents determined the building’s fair value was $7,800,000. Prepare the entry Jake should make on October 15, 2015.
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Answer #1

Journal Entry on October 15, 2015:-

Particulars Debit Credit
Building A/c Dr. 7,800,000
To Common Stock A/c [500000*0.10] 50,000
To Paid in Capital - in excess of Par Value - Common 7,750,000

Since the Building's fair value as determined by the real estate agents is given and is also higher than the estimated value of company stock, the entry is recorded with the fair value of building. The Common stock will be credited with the par value and the additional amount will be credited to paid in capital - in excess of par value - common stock.

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