On november 23, elder lift corporation, a wholesaler of hydraulic lifts, acquired land in exchange for 14,200 shares of $25 par common stock with a current market price of $34. journalize the entry to record the transaction.

The entry would be;

Land   Dr  $482800

        Share capital    Cr $355000

        Premium account  Cr $127800

Explanation:

In exchange for 14200 shares Elder life corporation has purchase a land. Before recording the transaction we need calculate the value of 14200 shares based on the current market price. The value of shares would represent the purchase price of the land.

Value of shares = 14200×$34

value of shares= $482800

Value of shares = Value of land

Elder lift corporation has issued additional shares in exchange for the land, therefore the share capital of Elder would increase (a credit) and the land (an asset) will also increase (a debit). Since the shares are being issued at a premium (i.e greater than the par value), equity account is increased based on the par value and the rest is transferred to the premium account.

The entry would be;

Land   Dr  $482800

        Share capital    Cr $355000

        Premium account  Cr $127800

Elder lift journal $

Date

November 23

Land Dr 355,000

Share capital cr. 355,000

Narration. Recognition of land acquired for 14200 shares at $25

Explanation:

The acquisition of the land is brought into the books by debiting the asset account and corresponding entry is a credit to the share capital which signifies issue of new shares to compensate for the acquisition or losing his number of shares holding in the firm which does not affect the numbers of total shares but only affects ownership status.

answer the law of increasing costs;