When firms issue common stock for assets other than cash, the firm records the shares exchanged for noncash assets at the fair value of the shares given or, if the firm cannot make a reasonable estimate, at the fair value of the assets received.

Question

Quizplus · Accepted Answer

This statement is true. When firms issue common stock for assets other than cash, the fair value of the shares given is recorded as the value of the noncash assets received. If the firm cannot determine the fair value of the shares given, then the fair value of the assets received is used as the basis for recording the transaction.

When Firms Issue Common Stock for Assets Other Than Cash