In order to reduce the risk associated with a new line of business, Conservative Corporation established Spin Company as a wholly owned subsidiary. It transferred assets and accounts payable to Spin in exchange for its common stock. Spin recorded the following entry when the transaction occurred:

In order to reduce the risk associated with a new line of business, Conservative Corporation established Spin Company as a wholly owned subsidiary. It transferred assets and accounts payable to Spin in exchange for its common stock. Spin recorded the following entry when the transaction occurred:

Cash and receivables    23,000     
Inventory    15,000     
Land    30,000     
Buildings    100,000     
Equipment    95,000     
Accounts Payable         20,000
Accumulated Depreciation—Buildings         32,000
Accumulated Depreciation—Equipment         30,000
Common Stock         56,000
Additional Paid-In Capital         125,000
Based on the preceding information, what number of shares of $7 par value stock did Spin issue to Conservative?

Multiple Choice

10,000


7,000


8,000 Correct

25,000

Explanation
8,000 is correct. Spin issued $56,000 of common stock at $7 par value for a total of 8,000 shares.

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