Question

On March 15, 2021, Ellis Corporation issued 5,000 shares of its no-par common stock in exchange for a patent. On the date of the transaction, the market price of the common stock was $22 per share. Ellis also received a tract of land from the City of Montrose as an enticement to build a new office building on the site. The land had a fair value of $510,000 and Ellis was required to pay only $200,000 to secure title to the land.

Required:

1.   Prepare the journal entries to record the transactions.

Answer 1

Solution 1:

Journal Entries - Ellis Corporation
Event	Particulars	Debit	Credit
1	Patent Dr	$110,000.00
	To Common stock		$110,000.00
	(To record purchase of patent by issue of common stock)
2	Land Dr	$510,000.00
	To Cash		$200,000.00
	To Revenue - Donation of Asset		$310,000.00
	(To record purchase of land)