On May 5, 2015, MacDougal Corp. exchanged 4,000 shares of its $25 par value treasury common stock for a patent owned by Masset Co. The treasury shares were acquired in 2014 for $90,000. At May 5, 2015, MacDougal's common stock was quoted at $34 per share, and the patent had a carrying value of $110,000 on Masset's books. MacDougal should record the patent at
A) $90,000.
B) $100,000.
C) $110,000.
D) $136,000.

Question

Quizplus · Accepted Answer

In accounting for non-monetary exchanges, such as trading treasury stock for a patent, the asset received (in this case, the patent) should be recorded at the fair value of the asset given up, unless the fair value of the asset received is more clearly evident. Here, the fair value of the treasury stock given up is more clearly evident and can be determined by the market price of the stock at the time of the exchange, which is $34 per share. Therefore, the patent should be recorded at the fair value of the treasury stock given up, which is 4,000 shares * $34 per share = $136,000.