 In this presentation, we will record the journal entry to issue common stock when cash is not received. We're going to issue the common stock and receive equipment instead, so issuing common stock for non-cash assets. The information will be on the left side. We're going to record the journal entry here in the general journal. Then we'll post it not to the general ledger, but to a worksheet. Here's our beginning balance. This is where we will post it. Here's our ending balance. This will give us a quick look at the effects on the accounts as well as the effect on the accounting equation. We've got the assets in green, we've got the liabilities in orange, the equity in light blue, the revenue and expenses in dark blue. We can see that we're in balance because the debits are non-bracketed or positive for Excel, and bracketed or accredited for Excel are credits. Debits minus the credits equals zero. That's what the green zero indicates. So net income is showing here at this time. This is just going to be a very short trial balance to give us an idea of something in balance so that we can see the effect. It really is helpful for us to see a balancing mechanism and actually post these journal entries to something to a trial balance so we can see the effect on it and the effect on the accounting equation. We of course are going to be focusing here on the equity section for a corporation. That's what typically differs for a corporation and that will be broken out in terms of looking at common stock, paid in capital for common stock, and then the retained earnings, not what we're focusing on here, but noting that the retained earnings is the accumulation of the revenue, less any distributions to the owner's dividends, and the common stock represents how much the owners have invested in terms of capital investment. Okay, so we're going to go over here. We're going to say that there's 20 issued 20,000 shares of $5 per stock for equipment valued at $150. So this is similar to just if someone wanted to buy into the corporation. Remember this is different from trading because we're not buying from another individual like a stock trade typically would be. We're buying stock from the corporation and rather than giving the corporation cash for that stock, we're just giving something else of value, in this case, equipment. So to do that, we need to kind of know the value of the equipment that we're giving so that that'll determine basically the market price of the stock. And that's really the confusing component here. And it may actually work the other way around. We might know the market price of the stock because it's exchanging possibly on a market exchange. And therefore, the negotiation process might tell us basically what the equipment cost is. But in any case, there's a market transaction happening here. And therefore it's going to determine the market transaction will determine or tell us what the prices of the equipment and or the market price of the stock. That will differ then from the par value, the par value just being an arbitrary number that we assign to the stocks in order to standardize them. So to record this first, we're going to say, well, is cash affected? Quit. And the answer for the corporation, no, we didn't get cash. We sold it for equipment. So what did happen is that we got another asset. We got equipment. What did we get? Equipment. Equipment is also an asset. It's got a debit balance. We need to go up. So we're going to do the same thing to it. Another debit. So I'm going to copy the equipment in F8, right-click and copy. We'll put that up top in B2, right-click and paste 1, 2, 3. The values. We could type that in there as well if we so choose. The amount is just going to be the market value of the equipment. So they're going to typically give that in a problem. We'd have to figure out what that would be in practice. And if our stock is traded on the exchange, then whatever we determine, that might help us to determine the market price of the equipment. So we're going to say the equipment is worth 150,000. Then we're going to credit something. Now we're going to credit something in the capital section as we would just if we invested equipment in a sole proprietor or a partnership. But this time we're going to issue stocks. So it's going to be some type of stock issuance that is going to be given for that equipment. That's going to be the common stock. So it's a credit balance representing what is owed to the owners. We're going to make it go up by doing the same thing to it, another credit. So I'm going to right-click on the common stock, right-click and copy. Put that in B3, right-click and paste 123 or we can just type it in there. The tricky thing is that it's not going to be a credit of 150,000. Why? Because there's a par value. And the par value is just going to be a standardized value. So it's not going to change with the market price. When we sell the stock, we're going to sell it for whatever we can. And therefore whatever equipment, as much equipment as we can get, we're going to sell it for that because that's what we do on the market price. The par value will just give us a standard number so that it will standardize this number. So all we're going to do on the par value is take the 20,000 shares we issued times five. And that'll be the 100,000. So I'm going to do that with a calculation here by saying rather than equals negative 20,000 times five. And that'll be the negative 100,000. The difference between the 150 we got in value for the equipment and the 100,000 is 50,000, what we need as a credit here in order to be in balance. I'm going to do that with our negative sum function, which is the plug formula, negative SUM, double-click the sum function, highlight the 150 to the 100. And that'll give us the 50,000 as a negative, the 100 and the 50 now of course equaling the 150 debit. What accounts should that go to? Additional paid in capital. So remember that, remember that these two represent what has been given to the company. So in terms of a capital investment and that's different. We're going to break that out differently here unlike we do in a partnership or sole proprietor to what has been earned less what has been distributed in terms of dividends. So the retained earnings is what still remains in terms of earnings over and above what was initially invested. These two common stock additional paid in capital represent what was initially invested. Why do we need two accounts to give that? Because the par value will standardize those common stocks so that we can know exactly from this number how many stocks were issued by dividing it by the par value. And the additional paid in capital will just represent whatever was paid over and above that par value because that will change with the market price as the market price changes. So this is going to go up. It has a credit balance. We're going to do the same thing to it. Another credit. We're going to copy this sale or this in F12, right click and copy. We're going to put that in B4, right click and paste, 1, 2, 3. There's going to be an hour journal entry. We post this out now. So here's the equipment account on our journal entry. Here it is on the trial balance. We're going to be here in H8 where we will say equals point to that 150,000 bringing the zero balance up by 150 to 150. Here's the common stock. We're going to be down here on common stock, something's in it already. This is not the initial stock offering where we're issuing more stock at some point in the future from the initial stock offering. We're going to say equals and point to that 100,000 bringing the 500,000 up by 100,000 to 600,000. Then we're going to go to the paid in capital right underneath. Here's the paid in capital on the journal entry. Here it is on the trial balance. We're here in H12 where we will say equals point to that 50,000 bringing the 60 up by 52, 110. Note that the equipment went up. No effect on net income, however, even though we got something of value, we got equipment. The company did not earn any revenue to get that equipment. What they did is give out some capital, some earning potential in the company. The ownership went up or the amount that's owed back to the owners in essence went up. That's going to be our transaction. We're going to go then over here and take a look at just the equity section of the calculation of equity in like more of a financial statement format where we would see this kind of confusing component in terms of the wording. We have to say that the common stock, there's $5 par common stock. This is the amount that was authorized, meaning they have the ability to issue up to 150,000 shares. How many are issued and outstanding? We can find that by looking at our numbers here. We can say, well, there's $600 worth of common stock divided by the par value, which is $5 means 120,000 are issued and outstanding. That's what's useful about that kind of symmetry, 120,000. Then if we go over here, we're going to put in M10. We're going to take this amount, put it in M10, so that's going to be, I don't want to credit. We want it to make it positive. They're going to say negative of that number and enter. Then we're going to do the additional paid in capital. We're going to put that here in M11. Once again, rather than equals negative of that number and enter, going to sum them up on the right side in M11 by saying equals SUM, double click the sum function, highlight the 600 and the 110 or 710. Then we'll just pull over the retained earnings, retained earnings, which we're not really dealing with in this problem. They would be affected by the accumulation of net income or closing net income out to retained earnings. We're going to say negative of this number. Then if we sum this up, it'll be the sum of these two, we're just adding these two up, 710 plus 658, that will be the total there. I'm going to fix this real quick so our accounting equation works up top. There is that. This is going to be our equity section. This is what would be owed to if it was just one owner. You can think of that. If all of this corporation was owned by one person who owned all the corporate stock, then this would be like the net value. In other words, it equals the assets minus the liabilities, $1,368,000. How do we know who to pay that to? We know who to pay that to just by how many shares they have because all the shares are equal, meaning if we liquidated the company, sold the equipment, paid off the liabilities, we would have $1,638,000 if we sold for that would be the book value if everything worked out perfectly. Then we could just pay that in accordance with the shares basically because all the shares, if there's only common stock shares, are all the same. That's the beauty of the corporation versus a partnership where of course we have to track each individual partner's capital account because how much will be owed to the partners will differ and the only way we know that is by tracking their capital account. With a corporation, how much is owed to the owners will differ, but the way we know that is that they just own more or less stock, which is just like kind of owning more or less dollars. They're all standardized units. That's going to be one of the principal differences in the equity section between a corporation and something like a sole proprietorship or partnership.