When a closely held corporation issues preferred shares for land, the land should be recorded at the
A) total value of the shares issued.
B) total book value of the shares issued.
C) total liquidating value of the shares issued.
D) fair market value of the land.

Question

Quizplus · Accepted Answer

The land should be recorded at the fair market value because preferred shares are not considered as a reliable indicator of the land's worth. The fair market value reflects the amount that a willing buyer would pay a willing seller in an arm's length transaction.

When a Closely Held Corporation Issues Preferred Shares for Land