McCallister Corp. acquired a machine in exchange for 100 shares of $2 par-value common stock. The fair market value of McCallister's stock at the time of the exchange was $53 per share. The company selling the machine to McCallister showed a book value of that machine of $4,000. Because of this transaction, McCallister's

Question

Quizplus · Accepted Answer

The equipment account is increased by the fair market value of the stock given up, which is 100 shares x $53 = $5,300. The common stock account increases by the par value of the shares issued, which is 100 shares x $2 = $200. The additional paid-in capital account increases by the excess of the fair market value over the par value, which is $5,300 - $200 = $5,100.