On January 1, Year 3, All Business Machines (ABM) issued 1,000 shares of its common stock for a building.Real estate appraisers estimated the building to have a market value of $55,000 on the date of acquisition.The common stock of ABM sold for $50 per share on the date of the acquisition.On January 1, Year 3, ABM paid $650 in real estate transfer taxes, $500 in real estate legal fees for recording the transaction, $1,750 in property taxes for Year 3, and $2,000 for a two-year insurance policy beginning January 1, Year 3.At what amount should the building appear in the Building account of ABM on January 1, Year 3?
A)$51,150
B)$52,900
C)$56,150
D)$59,900
E)$61,900

Question

Quizplus · Accepted Answer

The building should be recorded at the fair value of the consideration given, which is the market value of the stock issued: 1,000 shares x $50 = $50,000. Additional costs directly attributable to the acquisition, such as transfer taxes ($650) and legal fees ($500), should be added. Therefore, the building should be recorded at $50,000 + $650 + $500 = $51,150.

On January 1, Year 3, All Business Machines (ABM) Issued