Which of the following is incorrect for Smith Company when Smith issues 12,000 s

Question

Which of the following is incorrect for Smith Company when Smith issues 12,000 shares of $20 par value common stock and pays $22,000 cash in exchange for a building? The market price of the Smith stock on the exchange date was $35 per share and the building’s book value on the books of the seller was $220,000.

The additional paid-in capital account increases by $240,000.

The common stock account increases by $240,000.

Stockholders’ equity increases $420,000.

The building account increases by $442,000.

Explanation / Answer

In this transaction , when shares are issued and cash is paid in exchange for a building, the building account increases by:

(12000 shares*$35+$22000)=$442000

Correct option is the fourth one.

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