Scruffy Murphy is the president and principal stockholder of Scruffy's Bar & Grill, Inc. To expand, the

Question:

Scruffy Murphy is the president and principal stockholder of Scruffy's Bar & Grill, Inc. To expand, the business is applying for a $250,000 bank loan. To get the loan, Murphy is considering two options for beefing up the owners' equity of the business:
Option 1. Issue $100,000 of for cash. A friend has been wanting to invest in the company. This may be the right time to extend the offer.
Option 2. Transfer $100,000 of Murphy's personal land to the business, and issue to Murphy. Then, after obtaining the loan, Murphy can transfer the land back to himself and zero out the common stock.
Journalize the transactions required by each option. Which plan is ethical? Which is unethical and why?
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...