Journal Entries

Question

I need help writing the journal entry for this. I know Baking Equipment is my debit and Common Stock is my credit, but I am unsure of what amount is to be debited/credited.

October 13: The owner has baking equipment, including an oven and mixer, which they have been using for their home-based business and will now start using in the bakery. You estimate that the equipment is currently worth $5,000, and you transfer the equipment into the business in exchange for additional common stock. The equipment has a five-year useful life.

Answer 1

Hi Alicia,

Yes, you have the debits and credits correct. The amount will be $5,000, which is the fair market value of the consideration the business receives at the time it is put into the business.

Hope that helps! Reach out with any quesitons!

Best,

Patrick