A is corrent. When stock is issued for services, the transaction should be recorded at either the FV of the stock issued or the FV of the services received, whichever is more clearly determinable. The FV of stock traded on a public exchange is a more objective, reliable measure than a normal billing rate for legal services, which is likely to be negotiable. If the transaction is valued at $180 per share, legal expense would be debited for $180,000 (1,000 *$180), common stock would be credited for the par value of $5,000 (1,000 * $5), and additional paid-in capital would be credited for the difference ($180,000- $5,000 = $175,000).
B is incorrect. When stock is issued for services, the transaction should be recorded at either the FV of the stock issued or the FV of the services received, whichever is more clearly determinable. The FV of stock traded on a public exchange is a more objective, reliable measure than a normal billing rate for legal services, which is likely to be negotiable. If the transaction is valued at $180 per share, legal expense would be debited for $180,000 (1,000 *$180), common stock would be credited for the par value of $5,000 (1,000 * $5), and additional paid-in capital would be credited for the difference ($180,000 -$5,000 = $175,000).
C is incorrect. When stock is issued for services, the transaction should be recorded at either the FV of the stock issued or the FV of the services received, whichever is more clearly determinable. The FV of stock traded on a public exchange is a more objective, reliable measure than a normal billing rate for legal services, which is likely to be negotiable. If the transaction is valued at $180 per share, legal expense would be debited for $180,000 (1,000 * $180), common stock would be credited for the par value of $5,000 (1,000 * $5), and additional paid-in capital would be credited for the difference ($180,000 - $5,000 = $175,000).
D is incorrect. When stock is issued for services, the transaction should be recorded at either the FV of the stock issued or the FV of the services received, whichever is more clearly determinable. The FV of stock traded on a public exchange is a more objective, reliable measure than a normal billing rate for legal services, which is likely to be negotiable. If the transaction is valued at $180 per share, legal expense would be debited for $180,000 (1,000 *$180), common stock would be credited for the par value of $5,000 (1,000 * $5), and additional paid-in capital would be credited for the difference ($180,000 -$5,000 = $175,000).
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