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    slh6582's Avatar
    slh6582 Posts: 22, Reputation: 1
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    #1

    Jul 5, 2007, 12:14 PM
    Common stock ASAP
    1. Two thousand shares of no-par common stock are issued to the corporation’s promoters in exchange for their efforts, estimated to be worth $30,000. The stock has no stated value.
    2. Two thousand shares of no-par common stock are issued to the corporation’s promoters in exchange for their efforts, estimated to be worth $30,000. The stock has a $1 per share stated value.


    These are two homework questions that I have. My question here is what do I debit? Usually you issue stock in exchange for cash or some sort of inventory. Here, it just says in exchange for their efforts. What is the heading for the debit?
    Hermansherman's Avatar
    Hermansherman Posts: 37, Reputation: 4
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    #2

    Jul 5, 2007, 12:37 PM
    Quote Originally Posted by slh6582
    1. Two thousand shares of no-par common stock are issued to the corporation’s promoters in exchange for their efforts, estimated to be worth $30,000. The stock has no stated value.
    2. Two thousand shares of no-par common stock are issued to the corporation’s promoters in exchange for their efforts, estimated to be worth $30,000. The stock has a $1 per share stated value.


    These are two homework questions that I have. My question here is what do I debit? Usually you issue stock in exchange for cash or some sort of inventory. Here, it just says in exchange for their efforts. What is the heading for the debit?

    You can issue stock for all sorts of expenses, for instance research and development, selling, consulting, even accounting.
    Then your entry is
    Dr> appropriate P&L account
    Cr> Common Stock for par value
    Cr> APIC
    slh6582's Avatar
    slh6582 Posts: 22, Reputation: 1
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    #3

    Jul 5, 2007, 01:35 PM
    So in the example I gave, I can just make up an expense? Since the example just says "in exchange for their efforts" and no specific expense is listed, then I just make one up? Or should I put it under promotional expense?
    Hermansherman's Avatar
    Hermansherman Posts: 37, Reputation: 4
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    #4

    Jul 5, 2007, 02:04 PM
    Quote Originally Posted by slh6582
    So in the example I gave, I can just make up an expense? Since the example just says "in exchange for their efforts" and no specific expense is listed, then I just make one up? Or should I put it under promotional expense?

    That's what I would do. If the homework assignment did not provide a chart of accounts or any other information I would put it to "General administrative expense" or something like that. Promotion expense usually is used for promotion of a product or service
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