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9 July, 06:56

The W. J. Clinton Company issued 750 shares of $1 stated value common stock in exchange for land from the Whitewater Investment Company. The Whitewater Investment Company carried the land on its books at $45,000. The land was recently appraised at $70,000. The W. J. Clinton Company's common stock has a current market price of $100/share. When recording this transaction, how much should the W. J. Clinton Company record as additional paid in capital?

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  1. 9 July, 10:16
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    The journal entry is as follows:

    Land Dr $70,000

    Additional paid in capital $5,000

    To Common stock $75,000

    (Being the common stock is issued in exchanged for cash)

    The computation of the additional paid in capital is shown below:

    = Common stock - the appraised value of land

    where,

    The common stock = 750 shares * $100 = $75,000

    And, the appraised value of land is $70,000

    So, the remaining balance is

    = $75,000 - $70,000

    = $5,000

    The $5,000 would be recorded as an additional paid in capital
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