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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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On July 14, Peterman Corporation exchanged 1,000 shares of its $8 par value common stock for a plot of land. Peterman’s common stock is listed on the NYSE and traded at an average price of $21 per share on July 14. The land was appraised by independent real estate appraisers on July 14 at $23,000. As a result of this exchange, Peterman’s additional paid-in capital will increase by:

  1. a. $0
  2. b. $8,000
  3. c. $13,000
  4. d. $15,000

To determine

Identify the increase in the additional paid in capital.

Explanation

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Additional paid-in-capital: It is an amount of capital received from the shareholders in excess of par value.

Compute the increase in additional paid-in capital on common stock:

Additional paid-in capital on common stock} = {(Average market price of stock × Number of shares)<

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