On June 17, the Lattern Company issued 120,000 shares of its $0.10 par value common stock in exchange for land. On the date of the transaction, the fair value of the common stock, evidenced by its market price, was $10 per share. The journal entry to record this transaction includes:

Debit : Land $1,200,000

Explanation:

The journal entry lattern Company need to record is

Dr Land $1,200,000

Cr Credit common shares $12,000

Cr Paid in capital - Common shares $1,188,000

As 120,000 shares is exchanged, for the land and the share is traded in the exchange, the value of the land should be recorded at the market price of this

= 120,000 shares or 120,000 × $10 = $1,200,000

Common share account is recorded at lar value x number of shares issued = $0.1 × $120,000 = $12,000 while paid in capital common share account records the difference between market price and par value at the time of shares issuance or

= (10 - 0.1) × 120,000

= $1,188,000

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explanation: