Matt Shaw buys 100 shares of common stock for $8,000 in January.The value of the stock fluctuates in a narrow range (averaging $8,700)throughout the year.In November,when it has a value of $9,500,he donates it to a not-for-profit entity.On December 31,the stock has a fair value of $8,200.At what amount should the entity value the stock on its December 31 statement of financial position?

Question

Quizplus · Accepted Answer

According to the valuation principle, assets should be reported on the financial statements at their fair value. Since the stock had a fair value of $8,200 on December 31, that is the amount at which the entity should value it on its statement of financial position. The original purchase price of $8,000 and the high point of $9,500 are not relevant for the valuation on December 31.

Matt Shaw Buys 100 Shares of Common Stock for $8,000