Journal Entry:
Issuing Shares for Multiple Assets

by Sarah
(Miami, FL)

Shares issuedComputer equipment

Question:

How would you write this in a journal entry: a company issued 2,660 shares of its common stock after $31,360 in cash and computer equipment with a fair market value of $43,120 were received.


Answer:

Hi Sarah and thanks for your question. The journal entry would be as follows:

DR Bank.................................................$31,360
DR Computer Equipment....................$43,120
CR Common Stock...............................................$74,480
($31,360 + $43,120)

To explain the above, remember that what is happening here is we are getting more money and more computer equipment, which are both
assets . Since assets increase on the left side they are both debited. The credit goes to Common Stock, which is the most common type of owner's equity (share) in a company. Owner's equity exists and increases on the right side, so this is credited.

The entry above is a
compound entry or composite entry, meaning an entry where there is more than one debit or credit.

You can also write this in two separate entries, one for the cash received and one for the computer equipment received. In both these entries the credit would be to Common Stock (only for the value of the cash and the computer equipment individually):

DR Bank.................................................$31,360
CR Common Stock................................................$31,360

DR Computer equipment....................$43,120
CR Common Stock................................................$43,120


FYI, "Common Stock" is the term used more in the US, but outside the US this is sometimes referred to as
"Ordinary Share Capital." Both "Common Stock" and "Ordinary Shares" refer to the same thing - to the most common type of shares in a company without any special features (there can be other special types of shares too and these have their own names).

Hope that makes sense and helps! Good luck!

Best,
Michael Celender
Founder of Accounting Basics for Students


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Comments for Journal Entry:
Issuing Shares for Multiple Assets

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ordinary shares - what entry?
by: Anonymous

Hi guys,

I have a question.

I have a company which has been stated as follows:

particulars of stated capital:-

no of ordinary shares = 1
stated capital = 1,500,000
amount unpaid = 0
Par value = 0

what entry should be done in my accounting system??

thanks for your prompt reply...
your comments and answers would be the most appreciated.


shares
by: mike

How to record this transaction in General Journal?

On May the company advertised a new share issue. 220,000 ordinary shares were offered to the public at R7 each and 100,000 10% cumulative preference shares at R5.

Purchase a Machine Via Issue of its Ordinary Shares
by: Anonymous

So how to record for purchase an assets via an issue of 1000 000 of its ordinary shares of 0.50 each ?

Dr Assets 500,000
Cr Ordinary Share Capital 500,000

(1,000,000 X 0.50 = 500,000)

(Michael Celender)

Statement of equity in Manufacturing
by: Anonymous

How can I determine the value of ordinary shares and retained earnings for the statement of equity? Actually it is not stated specifically to the trial balance our professor had given us?

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