Foghorn Company entered into a sales transaction in which it agreed to receive common stock from Leghorn Corporation as payment for services provided to Leghorn Corporation. The journal entry to record the receipt of payment for the sales transaction will include a

When Foghorn Company receives common stock from Leghorn Corporation as payment for services provided, the journal entry to record the transaction will involve debiting an asset account and crediting a revenue account. In this case, the asset account is not the usual "Cash" account, but an account that represents the investment in common stock of Leghorn Corporation, often labeled as "Investment in Leghorn Corp. Common Stock" or simply "Stock Investments". The revenue account would be the "Service Revenue" or a similarly named account that reflects the income earned from providing the services.

The journal entry will look like this:

1. Debit "Investment in Leghorn Corp. Common Stock" (Asset account) 2. Credit "Service Revenue" (Revenue account)

The exact amount credited and debited will correspond to the fair market value of the common stock received if available or a fair value estimation of the services provided.

Here is an example of how the journal entry might appear:

Date: [Transaction Date] 1. Investment in Leghorn Corp. Common Stock XXXX Service Revenue XXXX (To record receipt of Leghorn Corporation common stock as payment for services provided)

In accounting, every transaction is recorded through journal entries, which include at least one debit and one credit, maintaining the fundamental accounting equation: Assets = Liabilities + Equity. Debits increase asset or expense accounts and decrease liability, revenue, or equity accounts. Credits decrease asset or expense accounts and increase liability, revenue, or equity accounts. In the provided transaction, an asset account (Investment in Leghorn Corp. Common Stock) increases because Foghorn Company is receiving something of value. At the same time, the company's revenue increases because it has earned income from providing services, so the Service Revenue account is credited. Choosing the correct accounts for the journal entry depends on the nature of the transaction and the type of payment received. Since Foghorn Company received common stock instead of cash, an investment account is debited to reflect the ownership in Leghorn's shares, rather than a cash account. This method of payment is common in transactions involving barter or services exchanged for assets other than cash. It is important for students to understand that regardless of the form of payment, the value of the transaction needs to be recorded accurately in the company's financial records.