A is corrent. When stock is issued for personal services performed by employees or outsiders, the transaction should be valued at the FMV of the stock or the FMV of the services, whichever is more clearly determinable. The market value of the shares as of the date of the contract for such services, rather than at the date of issuance of the shares, should be the basis for valuation. The contract is viewed in an accounting sense as a stock subscription. Therefore, on the date of the contract, the following journal entry should be made by Farm Corp.:
| Compensation expense | 40,000 |
| | Common stock | | 10,000 |
| | Additional paid-in capital | | 30,000 |
B is incorrect. When stock is issued for personal services performed by employees or outsiders, the transaction should be valued at the FMV of the stock or the FMV of the services, whichever is more clearly determinable. The market value of the shares as of the date of the contract for such services, rather than at the date of issuance of the shares, should be the basis for valuation. The contract is viewed in an accounting sense as a stock subscription. Therefore, on the date of the contract, the following journal entry should be made by Farm Corp.:
| Compensation expense | 40,000 |
| | Common stock | | 10,000 |
| | Additional paid-in capital | | 30,000 |
C is incorrect. When stock is issued for personal services performed by employees or outsiders, the transaction should be valued at the FMV of the stock or the FMV of the services, whichever is more clearly determinable. The market value of the shares as of the date of the contract for such services, rather than at the date of issuance of the shares, should be the basis for valuation. The contract is viewed in an accounting sense as a stock subscription. Therefore, on the date of the contract, the following journal entry should be made by Farm Corp.:
| Compensation expense | 40,000 |
| | Common stock | | 10,000 |
| | Additional paid-in capital | | 30,000 |
D is incorrect. When stock is issued for personal services performed by employees or outsiders, the transaction should be valued at the FMV of the stock or the FMV of the services, whichever is more clearly determinable. The market value of the shares as of the date of the contract for such services, rather than at the date of issuance of the shares, should be the basis for valuation. The contract is viewed in an accounting sense as a stock subscription. Therefore, on the date of the contract, the following journal entry should be made by Farm Corp.:
| Compensation expense | 40,000 |
| | Common stock | | 10,000 |
| | Additional paid-in capital | | 30,000 |
