Agricola an agricultural startup is issuing stock to its sha

Agricola, an agricultural start-up, is issuing stock to its shareholders. It issues 10,000 shares of $2 par value stock to its shareholders in exchange for $300,000 and a combine with a value of $500,000. What journal entry would Agricola book for this? What if the stock was no-par stock?

If Agricola incurred $50,000 of cost in issuing the shares, how would that affect the journal entries above? (You don’t need to redo them; you can simply note what would change.)

Solution

date

explanation

debit

credit

1-

cash

800000

common stock

520000

additional paid in capital-common stock

280000

2-

if the stock is of no par value

2-

cash

800000

common stock

800000

3-

if issue expense of 50000 are incurred

cash

750000

common stock

520000

additional paid in capital-common stock

230000