A corporation can receive assets other than cash in exchange
for its stock. (It can also assume liabilities on the assets received
such as a mortgage on property received.) The corporation records the
assets received at their market values as of the date of the
transaction. The stock given in exchange is recorded at its par (or
stated) value with any excess recorded in the Paid-In Capital in Excess
of Par (or Stated) Value account. (If no-par stock is issued, the stock
is recorded at the assets’ market value.) To illustrate, the entry to
record receipt of land valued at $105,000 in return for issuance of
4,000 shares of $20 par value common stock on June 10 is
Point:
Stock issued for noncash assets should be recorded at the market value
of either the stock or the noncash asset, whichever is more clearly
determinable.
Point: Any type of stock can be issued for noncash assets.
A
corporation sometimes gives shares of its stock to promoters in
exchange for their services in organizing the corporation, which the
corporation records as
Organization ExpensesCosts such as legal fees and promoter fees to bring an entity into existence..
The entry to record receipt of services valued at $12,000 in organizing
the corporation in return for 600 shares of $15 par value common stock
on June 5 is
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