James Lee, a wealthy investor, exchanged a plot of land that originally cost him \(\$ 30,000\) for 1,000 shares of \(\$ 10\) par common stock issued to him by Bay Corp. On the same date, Bay Corp. issued an additional 400 shares of stock to Lee for \(\$ 31\) per share.

Required

a. What was the value of the land at the date of the stock issue?

b. Show the effect of the two stock issues on Bay's books in a horizontal statements model like the following one. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element was not affected by the event.

c. Prepare the journal entries to record these transactions.

Transcribed Image Text:

Assets = Equity Cash + Land = Com. Stk. PIC in Excess Rev. - Exp. = Net Inc. Cash Flow