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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Business

Adyson Noble

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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Emilia Arias · Answer 1

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