Answered

Lewelling Company issued 116,000 shares of its $1 par common stock to the Michael Morgan law firm as compensation for 5,600 hours of legal services performed. Morgan’s usual rate is $260 per hour. By what amount should Lewelling’s paid-in capital - excess of par increase as a result of this transaction?

Answer :

Answer:

$1,340,000

Explanation:

The computation of the amount of aid-in capital - excess of par increase as a result of this transaction is shown below:

Total market value = Common stock + Additional paid-in capital account

Where,

Total market value is

= 5,600 hours × $260 per hour

= $1,456,000

Common stock

= 116,000 shares × $1

= $116,000

So, the additional paid in capital is

=  $1,456,000 - $116,000

= $1,340,000

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