Both methods are valid which method is better would

Both methods are valid. Which method is better would depend on the specific
details and how well the accountant knows the fair value of the stock and bonds.
After evaluating the information given to value the assets, the accountant
should choose the method that utilizes the better information.
E15-6 (Stock Issuances and Repurchase) Lindsey Hunter Corporation is authorized to
issue 50,000 shares of $5 par value common stock. During 2017, Lindsey Hunter took
part in the following selected transactions.
1. Issued 5,000 shares of stock at $45 per share, less costs related to the issuance
of the stock totaling $7,000.
Cash (5,000 × $45) – 7,000 218,000
Common Stock (5,000 × $5) 25,000
Paid-in-Capital in Excess of Par - Common Stock 193,000
2. Issued 1,000 shares of stock for land appraised at $50,000. The stock was
actively traded on a national stock exchange at approximately $46 per share on
the date of issuance.
Land 46,000
Common Stock (1,000 × $5) 5,000
Paid-in-Capital in Excess of Par - Common Stock 41,000
Use the stock price because it is actively traded and therefore a better indication
of the fair value of the trade.
3. Purchased 500 shares of treasury stock at $43 per share. The treasury shares
purchased were issued in 2013 at $40 per share.
Treasury Stock (500 × 43) 21,500
Cash 21,500
E15-14 (Entries for Stock Dividends and Stock Splits) The stockholders' equity accounts
of G.K. Chesterton Company have the following balances on December 31, 2017.
Common stock, $10 par, 300,000 shares issued
and outstanding
$3,000,00
0
Paid-in capital in excess of par--common stock 1,200,000
Retained earnings 5,600,000
Shares of G.K. Chesterton Company stock are currently selling on the Midwest Stock
Exchange at $37.
Instructions
Prepare the appropriate journal entries for each of the following cases.
(a) A stock dividend of 5% is declared and issued.
300,000 shares × 5% = 15,000 shares to be issued using a stock price of $37
Retained Earnings 555,000
Common Stock Dividend Distributable 150,000
Paid-in-Capital in Excess of Par - Common Stock 405,000
(To record declaration)
4

Common Stock Dividend Distributable150,000
Common Stock 150,000
(To record issuance)
(b) A stock dividend of 100% is declared and issued.
300,000 Shares x 100% = 300,000 shares to be issued using a stock price of $10 or par
Retained Earnings 3,000,000
Common Stock Dividend Distributable 3,000,000
(To record declaration)
Common Stock Dividend Distributable3,000,000
Common Stock 3,000,000
(To record issuance)
(c) A 2-for-1 stock split is declared and issued.
No entry is required for a stock split. The new par value of the stock is $5 or 10
÷ 2. And the new amount of shares issued and outstanding is 300,000 × 2 or
600,000.