Question

Fielder Company obtained land by issuing 2,000 shares of its \(10 par value common stock. The land was recently appraised at \)85,000. The common stock is actively traded at $40 per share. Prepare the journal entry to record the acquisition of the land.

Short answer

Land is debited by $80,000, common stock is credited by $20,000 and paid in capital excess of par credited by $60,000 to record the acquisition of land.

Step-by-step solution

Calculation of cost of land and common stock value

$\begin{array}{c}\mathrm{Cost}\mathrm{of}\mathrm{Land}=\mathrm{Number}\mathrm{of}\mathrm{Shares}\times \mathrm{Market}\mathrm{Price}\mathrm{of}\mathrm{Shares}\\ =2,000\times \$40\\ =\$80,000\end{array}$

$\begin{array}{c}\mathrm{Common}\mathrm{Stock}=\mathrm{Number}\mathrm{of}\mathrm{Shares}\times \mathrm{Face}\mathrm{Value}\mathrm{of}\mathrm{Shares}\\ =2,000\times \$10\\ =\$20,000\end{array}$

Journal entry of acquisition of land

Date	Particular	Debit ($)	Credit ($)
	Land	$80,000
	To Common stock		$20,000
	To Paid in capital excess of par		$60,000
	To record the acquisition of land