Modesto City owned an idle parcel of real estate consisting of land and a factory building. Modesto gave title to this realty to Mission Co.as an incentive for Mission to establish manufacturing operations in the city.Mission paid nothing for this realty, which had a fair market value of $250,000 at the date of the grant.Mission should record this nonmonetary transaction as a

Question

Quizplus · Accepted Answer

When a nonmonetary transaction occurs, such as the granting of realty, the recipient should record the transaction at fair value. In this case, Mission received realty with a fair market value of $250,000. Generally Accepted Accounting Principles (GAAP) require that nonmonetary exchanges be recorded at the fair value of the asset given up or the fair value of the asset received, whichever is more clearly evident. Therefore, Mission should record this transaction as a credit to Donated Capital for $250,000.

Modesto City Owned an Idle Parcel of Real Estate Consisting