Question

Prepare the necessary journal entry for each of the following transactions for Terpsichorp Corporation. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

(a) Issued 2,000 shares of its $10 par value common stock for $20 per share.

(b) Issued 5,000 shares of its stock for land advertised for sale at $90,000. Terpsichorp’s stock is actively traded at a market price of $16 per share.

No.	Account Titles and Explanation	Debit	Credit
(a)
(b)

Answer 1

Answer)

Journal

No.	Account Titles and Explanation	Debit	Credit
(a)	Cash (2,000 shares X $ 20 per share)	$ 40,000
	Common Stock (2,000 shares X $ 10 per share)		$ 20,000
	Paid-in Capital in Excess of Par – Common Stock (2,000 shares X $ 10 per share)		$ 20,000
	(Being 2,000 shares of common stock issued for cash)
(b)	Land (5,000 shares X $ 16 per share)	$ 80,000
	Common Stock (5,000 shares X $ 10 per share)		$ 50,000
	Paid-in Capital in Excess of Par – Common Stock (5,000 shares X $ 16 per share)		$ 30,000
	(Being 5,000 shares of common stock issued in exchange for land)

Notes:

· In part (a) shares having par value of $ 10 per share are issued for cash for $ 20 per share. Amount received in excess of its par value is credited to additional paid-in capital.

· In part (b) shares are issued in exchange for land. In the given scenario, the transaction will be recorded at Fair value of land or fair value of shares issued, whichever is reliable determined. Market value of shares (i.e. $ 80,000) will be used as it is the fair value of shares. Advertised value of can’t be used as this value may not be equal to the actual fair value of shares. Fair value per share in excess of the par value (i.e. $ 16 per share - $ 10 per share) is credited to Additional paid in capital