Gigantic Corp acquired a machine from Miko Company in exchange for 10,000 Gigantic common shares, for which the quoted market price on the stock exchange was $20 per share. The machine was estimated by Gigantic to have a fair market value of $225,000. (Assume that the market price of the shares and the fair value of the machine are equally reliable.)The book value of the machine in Miko's records was $190,000. At what amount should Gigantic record the machine?

Question

Quizplus · Accepted Answer

Gigantic should record the machine at the fair value of the consideration given, which is 10,000 shares at $20 each, totaling $200,000. This is because the fair value of the shares given is more clearly determinable and reliable than the estimated fair value of the machine.

Gigantic Corp Acquired a Machine from Miko Company in Exchange