Lindsey Hunter Corporation is authorized to issue 50,000 shares of $5 par value common stock. During 2020, Lindsey Hunter took part in the following selected transactions.

1. Issued 5,000 shares of stock at $45 per share, less costs related to the issuance of the stock totaling $7,000.

2. Issued 1,000 shares of stock for land appraised at $50,000. The stock was actively traded on a national stock exchange at approximately $46 per share on the date of issuance.

3. Purchased 500 shares of treasury stock at $43 per share. The treasury shares purchased were issued in 2016 at $40 per share ...

Instructions

(a) Prepare the journal entry to record item 1.

(b) Prepare the journal entry to record item 2.

(a).

Dr Cash 218,000

Cr Common Stock 25,000

Cr Paid-in capital - Common stock 193,000

(to record the issuance of 5,000 share at $45 with cost of $7,000)

(b)

Dr Land appraised expenses 46,000

Cr Common stock 5,000

Cr Paid-in capital - Common stock 41,000

(to record the issuance of shares in exchange for land appraisal services at market value of shares issuance)

Explanation:

(a)

Cash receipt is 5,000 x 45 - 7,000 = $218,000; Common stock increase by Par value x stock issuance = 5 x 5,000 = $25,000; Paid-in capital increase by (45-5) x 5,000 - 7,000 = $193,000.

(b)

Common stock increase by par value x stock issuance = 1,000 x 5 = $5,000; Appraisal Expenses is increased at the market value of the shares issuance = 1,000 x 46 = $46,000; Paid-in capital account increase by the amount calculated as (Share price - Par value) x share issuance = (46-5) x 1,000 = $41,000.