Merritt Company acquired a building valued at $190,000 for property tax purposes in exchange for 12,000 shares of its $5 par common stock. The stock is widely traded and selling for $15 per share. At what amount should the building be recorded by Merritt Company?

Question

Quizplus · Accepted Answer

The building should be recorded at the fair value, which is the market value of the stock given, since the stock is widely traded. Therefore, the building should be recorded at 12,000 shares x $15/share = $180,000.

Merritt Company Acquired a Building Valued at $190,000 for Property