't relevant because the shareholders will demand shares equal to the market value of the and additional paid-in capital accounts accordingly. The assets' prior book asset contributed. For example, on November 12, Kahn Corporation issued 15,000 shares of its $1 par ordinary shares for equipment worth $4,000 and a building worth $120,000. Kahn's entry is: A1 Nov. 12 Equipment D. 4,000 120,000 Building Ordinary Shares (15,000 × $1) Paid-in Capital in Excess of Par ($124,000 – $15,000) To issue go-par shares in exchange for equipment and a building. 4. 15,000 109,000 Assets and equity both increase by $124,000. Shareholders' Assets Liabilities Equity + 4,000 + 15,000 + 120,000 + 109,000 Ordinary Shares Issued for Services. Sometimes a corporation will issue shares in exchange for services rendered, either by employees or outsiders. In this case, no cash is exchanged. However, the transaction should be recognized at fair market value. The corporation would otherwise recog- nize an expense for the fair market value of the services rendered. Share capital is increased for its par value (if any), and additional paid-in capital is increased for any difference. For example, assume that Kahn Corporation engages a website designer to create the company's website. The website designer would ordinarily charge $25,000 for such services, but agrees to accept shares rather than cash in settlement of the fee. The fair market value of each share at the time of exchange is $10 per share (par value of $1 per share). The journal entry to record the transaction would be: A1 C2 25,000 Website development Ordinary Shares Paid-in Capital in Excess of Par ($25,000 – $2,500)9YY500 1 2,500 22,500 3. 4. In this case, retained earnings (shareholders' equity) is eventually decreased by $25,000 rben the net profit is closed to retained earnings account), and paid-in capital (shareholders' equity) is increased for the same amount, Share Issuance for Other than Cash Can Create an Ethical Challenge ing standards require a çompany to record its shares at the foir mo
't relevant because the shareholders will demand shares equal to the market value of the and additional paid-in capital accounts accordingly. The assets' prior book asset contributed. For example, on November 12, Kahn Corporation issued 15,000 shares of its $1 par ordinary shares for equipment worth $4,000 and a building worth $120,000. Kahn's entry is: A1 Nov. 12 Equipment D. 4,000 120,000 Building Ordinary Shares (15,000 × $1) Paid-in Capital in Excess of Par ($124,000 – $15,000) To issue go-par shares in exchange for equipment and a building. 4. 15,000 109,000 Assets and equity both increase by $124,000. Shareholders' Assets Liabilities Equity + 4,000 + 15,000 + 120,000 + 109,000 Ordinary Shares Issued for Services. Sometimes a corporation will issue shares in exchange for services rendered, either by employees or outsiders. In this case, no cash is exchanged. However, the transaction should be recognized at fair market value. The corporation would otherwise recog- nize an expense for the fair market value of the services rendered. Share capital is increased for its par value (if any), and additional paid-in capital is increased for any difference. For example, assume that Kahn Corporation engages a website designer to create the company's website. The website designer would ordinarily charge $25,000 for such services, but agrees to accept shares rather than cash in settlement of the fee. The fair market value of each share at the time of exchange is $10 per share (par value of $1 per share). The journal entry to record the transaction would be: A1 C2 25,000 Website development Ordinary Shares Paid-in Capital in Excess of Par ($25,000 – $2,500)9YY500 1 2,500 22,500 3. 4. In this case, retained earnings (shareholders' equity) is eventually decreased by $25,000 rben the net profit is closed to retained earnings account), and paid-in capital (shareholders' equity) is increased for the same amount, Share Issuance for Other than Cash Can Create an Ethical Challenge ing standards require a çompany to record its shares at the foir mo
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Can anyone tell me why retained earning is eventually decreased by $25000.
![value isn't relevant because the shareholders will demand shares equal to the market value of the
capital and additional paid-in capital accounts accordingly. The assets' prior book
par ordinary shares for equipment worth $4,000 and a building worth $120,000. Kahn's entry is:
asset contributed. For example, on November 12, Kahn Corporation issued 15,000 shares of its $1
A1
D
Nov. 12 Equipment
21
4,000
120,000
Building
Ordinary Shares (15,000 × $1)
Paid-in Capital in Excess of Par ($124,000 – $15,000)
To issue no-par shares in exchange for equipment and a building.
15,000
109,000
4
Assets and equity both increase by $124,000.
Shareholders'
Assets
Liabilities
Equity
+ 4,000
0.
+ 15,000
+ 120,000
+ 109,000
Ordinary Shares Issued for Services. Sometimes a corporation will issue shares in exchange
for services rendered, either by employees or outsiders. In this case, no cash is exchanged. However,
the transaction should be recognized at fair market value. The corporation would otherwise recog-
nize an expense for the fair market value of the services rendered. Share capital is increased for its
par value (if any), and additional paid-in capital is increased for any difference. For example, assume
that Kahn Corporation engages a website designer to create the company's website. The website
designer would ordinarily charge $25,000 for such services, but agrees to accept shares rather than
cash in settlement of the fee. The fair market value of each share at the time of exchange is $10 per
share (par value of $1 per share). The journal entry to record the transaction would be:
A1
D
A
Website development
Ordinary Shares
Paid-in Capital in Excess of Par ($25,000 – $2,500) 9XY500
25,000
2,500
22,500
21
3.
In this case, retained earnings (shareholders' equity) is eventually decreased by $25,000
(when the net profit is closed to retained earnings account), and paid-in capital (shareholders'
equity) is increased for the same amount.
Share Issuance for Other than Cash
Can Create an Ethical Challenge
eounting standards require a company to record its shares at the fair market value of whatever the
Couion receives in exchange for the shares. When the corporation receives cash there is clagr](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0ef9f81c-8832-475e-81d0-37cf0d43f515%2F142d5864-9db2-4098-9d9e-a91c16f49f46%2Fzr1zxeb_processed.jpeg&w=3840&q=75)
Transcribed Image Text:value isn't relevant because the shareholders will demand shares equal to the market value of the
capital and additional paid-in capital accounts accordingly. The assets' prior book
par ordinary shares for equipment worth $4,000 and a building worth $120,000. Kahn's entry is:
asset contributed. For example, on November 12, Kahn Corporation issued 15,000 shares of its $1
A1
D
Nov. 12 Equipment
21
4,000
120,000
Building
Ordinary Shares (15,000 × $1)
Paid-in Capital in Excess of Par ($124,000 – $15,000)
To issue no-par shares in exchange for equipment and a building.
15,000
109,000
4
Assets and equity both increase by $124,000.
Shareholders'
Assets
Liabilities
Equity
+ 4,000
0.
+ 15,000
+ 120,000
+ 109,000
Ordinary Shares Issued for Services. Sometimes a corporation will issue shares in exchange
for services rendered, either by employees or outsiders. In this case, no cash is exchanged. However,
the transaction should be recognized at fair market value. The corporation would otherwise recog-
nize an expense for the fair market value of the services rendered. Share capital is increased for its
par value (if any), and additional paid-in capital is increased for any difference. For example, assume
that Kahn Corporation engages a website designer to create the company's website. The website
designer would ordinarily charge $25,000 for such services, but agrees to accept shares rather than
cash in settlement of the fee. The fair market value of each share at the time of exchange is $10 per
share (par value of $1 per share). The journal entry to record the transaction would be:
A1
D
A
Website development
Ordinary Shares
Paid-in Capital in Excess of Par ($25,000 – $2,500) 9XY500
25,000
2,500
22,500
21
3.
In this case, retained earnings (shareholders' equity) is eventually decreased by $25,000
(when the net profit is closed to retained earnings account), and paid-in capital (shareholders'
equity) is increased for the same amount.
Share Issuance for Other than Cash
Can Create an Ethical Challenge
eounting standards require a company to record its shares at the fair market value of whatever the
Couion receives in exchange for the shares. When the corporation receives cash there is clagr
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