Question

When corporations issue stock in exchange for professional services, what account(s) should be debited and what account(s) should be credited?

a) Debit Professional Services Expense; Credit Common Stock
b) Debit Professional Services Expense; Credit Cash
c) Debit Professional Services Expense; Credit Paid-in Capital
d) Debit Professional Services Expense; Credit Retained Earnings

Answer 1

Corporations should debit Professional Services Expense and credit Common Stock and/or Paid-in Capital when issuing stock in exchange for services, depending on the value relative to the stock's par value.

Step-by-step explanation:

When corporations issue stock in exchange for professional services, the correct accounting treatment would be to Debit Professional Services Expense and Credit Common Stock and/or Paid-in Capital, depending on the value of services received in relation to the par value of the shares issued. The par value of the shares would be credited to Common Stock and any amount in excess would be credited to Paid-in Capital.